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Capital gain tax liability on JDA
A and B entered into JDA on 1.2.2015 with Builder/Developer for development of their ancestral land alongwith their cousion. The land was purchased in the year 1960 by their grandfather and later inherited by A&B through their father. In 2010 father died living behind a widow, two son and two daughter. Both son A&B entered into JDA with share in construction area in the ratio 55: 45 without any cash consideration. Builder proposed to give five flats of 100sq. ft each, total 5500 sq ft. to A & B. The time taken for completion of project was 3 1/2years (inclusive of xtension period of 6 months) .Other details are as under : Joint share of A & B -55%, Builder-45% Land given for development by A& B-3400sq ft. Market cost/Govt. cost of land admeasuring 3400sq ft in 2001-Rs. 10 lakhs Market cost/Govt. cost of land admeasuring 3400sq ft in 2015 -Rs. 100 lakhs Market cost/Govt. cost of land admeasuring 3400sq ft in 2019 -Rs. 150 lakhs Rate of construction 1500 per sq. feet. Market cost of 5500 sq ft. in 2015 = 150 lakh Market cost of 5500 sq ft. in 2019 = 200 lakh Note Both A & B has opted only for share of 55% in the construction of their land without any cash consideration. Agreement was made jointly by A & B as such they will get their share of five flats jointly Builder has not handed over the flat to A & B and had proposed to give it in on 1.1.2020. A & B has not sold any property of their share till date. A has purchased a flat on 01.01.2016 from his resources and bank loan worth Rs. 50 lakhs Question i) Whether both the son A & B are liable for capital gain tax separately or jointly according to their income ii) If Yes, how much capital gain liability will arise for A & B separately iii) The liability will occur immediately from the assessment year 2015-16 or after completion of the project and/or after giving possession of five flats by the builder. iv) Whether section 45(5a) is applicable in the instant case. If yes, please advise in detail. v) Whether son A can get exemption under section 54(f). If yes, whether it will be applicable only for his share or for undivided share JDA was made jointly by the two male coparceners on behalf of five coparceners vi) Whether son B can claim exemption under 54(E)© now because till date possession of any flat is not given by any builder. vii) Whether A & B are also liable for GST. If yes how much.
Asked 5 years ago in Capital Gains Tax
Hello,
There would be Capital Gains(Income Tax) and GST liability on both A & B.
Under Income Tax, Sec. 45(5A)would be applicable. The transfer of title of land by the landowner A & B to the developer under a JDA would be taxable on receipt of the certificate of completion for the whole or part of the project, provided the landowner does not transfer his share in the project to any other person on or before the date of issue of said certificate of completion. The Full Value of consideration would be the stamp duty value of land or building or both, of the landowner’s share in the project, on the date of issuing of the certificate of completion by the competent authority, to the landowner, as increased by any monetary consideration received by the landowner, if any.
A can get the exemption for investment in new house property under sec. 54F and B can invest as per Sec. 54EC for exemption from capital gain.
Under GST, Landowner A & B would be liable for GST first on the transfer of development rights to the builder/developer and second at the time of sale of flats to the customers.
For better understanding, you can either hire a CA for the whole set of transactions or take a phone consultation.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
Please take phone consultation.
Thanks for answering. Please advise the amount of capital gain tax payable in the instant case for Mr. B or what amount B should invest in REC bond for claiming exemption
Asked 5 years ago
1. They will be liable for capital gain separately and since no deed was made showing their share in this 55% it will be considered as equal.
2. Capital gain would be 200 less indexed cost of acquisition since they have received such land in will we will index it from 2001 and so 10/ 100 * 289 and so cost would be 28.9 lakh, 45% of same would be 13 lakh and so capital gain would be 187 lakh and tax on same would be 37.4 lakh and share of each person would be 18.7 lakh.
3. If the completion certificate was received in 2015-16 then tax liability will come in 2015-16 and above calculation would change accordingly.
4. Yes section 45(5A) deals with JDA and your case is also JDA so it will be applicable the above calculation is as per 45(5A).
5. Yes they can get exemption of 54F if they were not owning any flat before that but it will be restricted to one flat they got in JDA.
6. In case of JDA sale is considered as complete when the builder gets completion certificate therefore I dont think they can claim any exemption now except 54F as investment was automatically done.
7. Yes in case of JDA GST is applicable on land owner as well it will at the rate of 18% on value of land as they are transferring right to builder.
It would be better if you take phone consultation for better one to one discussion.
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