Tax Implications in case of Joint Development Agreement (JDA)
Querist
XYZ Developers, a registered partnership firm, doing real Estate Development having address in Thane (W) – 400601.
Facts -
1. The Querist is the owner of a big land parcel in Thane. The land is the business asset of the entity held as stock in trade.
2. The Querist would like to enter into a joint development agreement with a Developer to develop the said land.
3. The consideration for the said agreement will be part in cash as refundable deposit (security deposit) of Suppose 100 Rs (which would be paid in two tranches of 80 Rs and 20 Rs) and a certain percentage of constructed area. The 100 Rs security deposit will at a later stage be converted into revenue share (based on certain percentage) at the full completion of the project. The construction will be completed in 3 parts and part wise OC and respective area share will be received.
Query
1. What are the income tax implications for the Querist –
When income tax will be triggered
1) At the time of Agreement
2) At the time of Completion and part wise OC
3) At the time of actual sale of units/flats
2. What are the TDS implications in case of JDA which are to be done by the developer?
1)Under which section TDS would be deducted in JDA i.e., u/s 194IA or 194IC
2) At what moment TDS will be deducted (whether at agreement, Part wise OC, or at the time of realization of revenue share)
3) On which amount TDS will be deducted in respective sections i.e., 194IA and 194IC (computation mechanism)
4)194IA is generally for transfer of immovable property whether for business asset, transfer definition u/s 2(47) will attract as it is just sale of development rights and not land?
3. In case of showing 100 Rs as refundable deposit whether any compliances or tax implications gets triggered?