Capital Gain Tax on JDA for flats sold before OC, flats sold after OC and for flats retained

Capital Gain Tax on JDA for flats sold before OC, flats sold after OC and for flats retained

Land provided to Builder for construction of apartment under JDA in Apr'2019 with Landowner share 40% & Developer share 60%.
Land provided for development rights is 2000 Sq Yards
Total Built up Area is 40000 SFT of 20 Flats with each 2000 SFT
Area provided by Builder to Owner is 16000 SFT (8 flats of 2000 SFT each)
Stamp duty value of land per Sq yard as on 1st Apr 2001: Rs 100 (Ancestral property)
Fair Market Value of land per Sq yard as in 1st Apr 2001: Rs 200
Stamp duty value of land per Sq.yard in FY 2019-20 is Rs 3000
Stamp duty value of apartment in FY 2019-20 per Sq.ft is Rs 1200
Cost of construction of apartment per Sq.ft: Rs 1500
Monetary consideration received: Nil
As per JDA, project will be completed & completion certificate expected by Mar'2021.
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Now from my above share of my 8 flats, I have sold 2 semifinished flats in Jan'20
Flat 1: 2000 SFT for 32 Lakhs (undivided land share is 100 SqYards)
Flat 2: 2000 SFT for 24 Lakhs (undivided land share is 100 SqYards)
Out of remaining 6 Flats (12000 SFT with undivided land share of 600 SqYards), I plan to sell 3 flats later after OC is received and retain 3 flats for myself. 

In regard to above, I would like to know the below details:
Do we incur any STCG or only LTCG? 
Do we incur any LTCG for flats retained also?
Please let me know in detail what is the capital gain tax amount to be paid for development rights / flats sold for FY 2019-20 & FY 2020-21 as Project completion expected by March 2021. Assuming CII for 2019-20 & 2020-21 as 289 and CII for base year (2001-02) as 100. Thanks.

Asked 4 years ago in Capital Gains Tax

For the flats sold before completion certificate tax needs to be paid now as they wont fall in 45(5A) and that would be considered as sale of your rights in the property. It can be considered as sale of land but everything depends on your agreement.

And since the sale has been done before April 2020 you can take cost for 2001 as FMV but any sale after April 2020, cost would be restricted to Circle rate or stamp duty value.

Such capital gain would be long term capital gain.

Capital gain on sale of development rights would be long term capital gain and then when you sale flat it will again be long term or short term depending on the term for which you hold the house.

Since you have already sold rights your capital gain for such rights would be: sale consideration less Cost: 100 sq yd *200 *289/100.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo

CA, Jaipur

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- In case of sale of flats before obtaining OC, capital gain will arise in the year of JDA signed by you. COA will be stamp duty value of the flats on the date of sale.

- In case of sale of flats post OC, sale consideration and cost will be stamp duty value of the property.

- In both the cases, it would be LTCG.

Vivek Kumar Arora

CA, Delhi

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Dear Sir,

Hope you are doing well !!

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed

CA, Mumbai

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Hello,

Taxation under the JDA Joint Development Agreement is different as compared to normal capital gain. Here Sec. 45(5A) comes to the scenario. AS per Sec. 45(5A), Capital Gain arising under JDA are taxable in the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. And the stamp duty value, on the date of issue of the said certificate, of his share, being land or building or both in the project, as increased by the consideration received in cash, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.

For the sale of flats before containing the Completion Certificate would be taxable in Jan. 2020 itself. LTCG would be applicable.

For the sale of flats after containing the Completion Certificate, Sec. 45(5A), as stated above, would be applicable.

I hope that this answer satisfies your requirements.

Regards,

CA Hunny Badlani

Hunny Badlani

CA, Madhya Pradesh

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Vishrut Rajesh Shah

CA, Ahmedabad

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1) As per my understanding from the above answers, it looks there is no Short Term Capital gain incurred in my case even for the 2 flats sold before getting completion certificate. Is that right?
2) Regarding LTCG, it would be Stamp duty value of the flats received / Actual sale value + Monetary consideration - indexed cost of acquisition of land i.e.
Sale Consideration: 3200000 (Flat1 sold at 32 lakhs) + 2400000 (Flat2 sold at 24 lakhs = 5600000
SDV of Balance Flats Recd: 1200 Rs/SFT * 12000 SFT = 14400000
(+) Monetary Consideration: 0
(-) Indexed cost of acquisition: 1000 SqYards * 200 Rs/SqYard * 2.89 = 578000
LTCG: 5600000+14400000+ 0-578000 = 19422000
Tax: 20% of 19422000 = 3884400/-
Can you please confirm/clarify if the above is correct?

Asked 4 years ago

1) As the land was acquired before April 2001, CG on sale of flats before OC would be LTCG. For sale of flats post OC, retain the flats atleast for two years from the date of completion certificate issued to be LTCG. In case of flats retained by you, it would be LTCG.

2) Capital gain computation

a) In the ITR of A.Y. 2020-21,Sale of flats before obtaining OC, sale consideration would be higher of SDV or actual sales consideration. SDV would be 2000*1200=24 lacs for each. Sale consideration would be 32 lacs and 24 lacs. Total sale consideration would be Rs.56 lacs. ICOA would be 2000*200*2.89=11.56 lacs, tax would be 9.24 lacs.

b) In the ITR of A.Y. 2021-22, sale consideration would be SDV+monetary consideration received on the date of completion certificate. Notional COA would be SDV of 6 flats therefore capital gain would be zero.

c) At the time of sale of three flats post OC, sale consideration would be higher of SDV or actual sales consideration whichever is higher. COA would be SDV as per point no.b above. ICOA from the year of obtaining CC till the year of actual sale.

3) GST on the three flats sold post OC would be paid by the developer. No GST on the remaining six flats of the owner.