JDA is a registered agreement in which a person owning land or building or both, agrees to allow another person to develop a real estate project on such land or building or both, in consideration of a share, being land or building or both in such project, whether with or without payment of part of the consideration in cash.
Point of Taxation
It means when landowner is liable to pay capital gain tax on his share received from the builder/promoter. From Assessment Year 2018-19 (i.e. Previous Year 2017-18), capital gain shall be taxable in the hands of owner of land/building as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. The stamp duty value of the share of the owner of land/building in the developed property on the date of issuing of the said certificate of completion (as increased by any monetary consideration received, 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.
Exception to the above Point of Taxation
If the owner of the land/building transfers his share in the project to any other person on or before the date of issue of said certificate of completion, the capital gains (as determined under general provisions of the Act) shall be deemed to be the income of the previous year in which such transfer took place and shall be computed as per provisions of the Act without taking into account the above special provisions of Section 45(5A).
Also Read: Income Tax on F&O and Intraday Trading
Applicability of provisions of section 45(5A)
- The assessee (i.e. land/building owner) is an Individual or a Hindu undivided Family.
- The assessee has entered into a “specified JDA agreement” discussed above.
Where the capital gain arises from the transfer of a capital asset, being share in the project, in the form of land or building or both, referred to in sub-section (5A) of section 45, not being the capital asset referred to in the proviso to the said sub-section, the cost of acquisition of such asset, shall be the amount which is deemed as full value of consideration in that sub-section. Section 49(7).
Applicability of TDS deduction u/s 194-IC
Section 194-IC has been inserted with effect from 01.04.2017. It provides for tax deduction in the case of joint development agreement.
- Who is responsible for Tax deduction – Any person responsible for paying to a resident any sum by way of consideration (not being consideration in kind) under joint development agreement is responsible for tax deduction u/s 194-IC. Builder/Developer are responsible to deduct TDS on payment of cash consideration to the landowner against his share.
- Time of Tax deduction – Tax is deductible at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque/draft or by any other mode, whichever is earlier.
- Rate of Tax deduction – Tax is deductible a the rate of 10%. If PAN of recipient is not available, tax is deductible at the rate of 20%.
- Threshold limit – NIL
Capital Gain Tax on JDA
Also Read: Income Tax Old tax rates vs New tax rates – Section 115BAC
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