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Is generation of tdr from muncipality is laible for ltcg?


S S Dahale ( Agri and business)     31 August 2016

S S Dahale
Agri and business 
 13 likes  434 points

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  Basic question is geneartion of  TDR ( fungible FSI -Hypothetical rights of development in lieu of affaected area under DP plan /acquisition  )  from a muncipal Corporation  is liable for LTCG, ?  yes  or No ,  If Yes how to compute it ? If No, will it be a business income  for a owner / holder of TDR certificate ?

 Mr.ABC is an entrepruener, having property , since sevearl years , period of more than 3 years within  municipal limits , which is affected by Development Plan-Town Palnning proposals  l like widening of roads  to DP road , new road , garden, vegetable market ,

As State Govt. and municipal Corporation is having paucity  of funds , and as per sanctioned policy has offered compensation of affected area (assume 1000 SqMtr ), to give TDR ( transferrable  development rights) double FSI ( 2000 Sqmtr) , against  that affected area, that either can be used  by HIM at other locations (within same city) by him , or can sell it / transfer it as TDR to other persons .

 Now procdure to Do so invloves , REGSITERED RELINQUISHEMENT DEED by owner / POA holder of affected land  favoring Munc.Corpoartion , assume that land of 15000 SqMtr. is held by him since 2006  ( govt. valuation Rs. 75 lacs), he relinqushed 1000 SqMtr ( without any monetory compensation) ( govt valuation for erstwhile 1000 SqMtr. = Rs.20 lacs )  favoring MC in 2016, and got that TDR certificate of 2000 SqMtr,

 Now , if he uses this TDR anywhere within city   ,present  cost  of that TDR (2000 SqMtr) is  around  Rs. 60 lacs ,   if he sells it in part  current year he can genearte Rs.80 lacs.

 question is  is LTCG is payable  for TDR (twice of permissible FSI of affacted area ) so generated by him ( retaining  that TDR certicate  SAFELY with him self ) or otherwise

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Aditi Kaur (Practising CA)    01 September 2016

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Dhirajlal Rambhia (KVO Merau Kutchh)     31 August 2016

Dhirajlal Rambhia
KVO Merau Kutchh 
 9239 likes  93400 points

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In short:: there are many High court orders declaring the gains of the TDR as Capital Gain; BUT BECAUSE OF COST OF AQUISITION BEING NIL, NOT TAXABLE to the owners holding it as capital assets.

For more details refer: https://sktyagidt.com/upload/article/Tax-treatment%20in%20respect%20of%20receipt%20on%20transfer%20or%20sale%20of%20Transferable%20Development%20Rights%20_TDRs_.pdf

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S S Dahale ( Agri and business)     31 August 2016

S S Dahale
Agri and business 
 13 likes  434 points

View Profile | My Other Post

 Thanks , it was pleasurable explaination from S.K.Tyagei ji

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Dhirajlal Rambhia (KVO Merau Kutchh)     31 August 2016

Dhirajlal Rambhia
KVO Merau Kutchh 
 9239 likes  93400 points

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Yes, indeed very informative on TDR


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