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PGBP or Capital Gains

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Trex Gaming_67

20 Points Posted on 05 June 2023

my business is purchasing land, constructing houses and selling the land and house.

i buy 1-2 plot of land and construct 1-2 houses during a year

should I show this as business income or capital gains?

while purchasing i register the property in my name.

Replies (3)

Quick Summary

This discussion clarifies whether income from buying land, building houses, and selling them should be treated as business income (PGBP) or capital gains. The consensus is that this regular activity constitutes business income, especially when properties are registered in your name during purchase. While the initial advice points to PGBP, a follow-up question explores the possibility of alternating between PGBP and Capital Gains treatment in different years, which is generally not advisable for consistent business activities.

Sanjana Mohanty

20 Points Posted on 05 June 2023

The income from purchasing land, constructing houses, and selling them would generally be classified as business income rather than capital gains. This is because you are engaged in a regular and systematic activity of buying land, constructing houses, and selling them, which aligns with the definition of a business. The fact that you register the property in your name during the purchase further supports the classification of this income as business income.