S. Krishnan – [2026] 182 taxmann.com 707 (Article)
1. Introductory Remarks
Joint Development of Property is a popular method of development of property. Here, an owner of the site with (an) existing house (s) built on it and a builder/ developer come together to enter into an arrangement known as Joint Development Agreement (JDA) to develop a property jointly. The land is provided by the owner. The developer provides his expertise and spends money in developing the project and the constructed flats are divided between them in a predetermined way.
2. JDA and Calculation of Capital Gains
A JDA can also be explained as an arrangement between a landowner and a builder/developer where the landowner contributes his land and the builder/ developer takes the full responsibility of obtaining approvals, construction, launching and marketing the project with the help of financial resources. The term used for land contributed by the owner is usually referred to as “land ceded.” The Land owner for the value of land ceded by him, gets the consideration from the builder/developer in the form of lump-sum or percentage of sales revenue or some specific percentage of constructed area in the project as it purely depends upon the terms and conditions as mutually agreed by the parties to this arrangement. There are also cases wherein the transfer consideration would consist of lump sum payment and a specified percentage of constructed area. The builder/developer would also provide rental compensation per month for the total period of agreement towards providing alternate accommodation for the landowner.
The capital gain calculation is made as under-
Transfer consideration
(a) Guideline valuation of land ceded – area of land ceded multiplied by guideline value per square foot as on the date of transfer
(b) Cash consideration – payment of consideration through cheque or RTGS.
(c) Rental compensation -usually provided to cover period of JDA.
The sum of these three elements can be taken as —A
Net transfer consideration
Total sum of expenses incurred in connection with transfer such as brokerage/ commission, Advocate fees incurred in drafting JDA if spent by the transferor/owner of land and buildings, travelling expenses one way from place of residence to place where property is situated in the case of property owned by an NRI and JDA is signed by him in person. Boarding and lodging expenses incurred by NRI from the date of landing till the date of signing of JDA can also be claimed from total consideration to arrive at net transfer consideration- This can be designated as A1
Indexed Cost of Acquisition
It is to be stated at this stage that NRIs are not entitled to have the benefit of indexation with effect from 23.07.2024.
If the property had been acquired prior to 01-04-2001
Guideline value of land taken from the respective State Government Registration site – it is available for land as on 01-04-2002 in Tamil Nadu and from that value 5% can be deducted to arrive at value of land as on 01-04-2001. For all other states suitable formula can be adopted in this regard. The value for the area of land ceded can be taken as the value of land as on 01-04-2001.The index point as on 01-04-2001 was 100. The guideline value of proportionate portion of land ceded can be multiplied by index point for the year in which property is transferred and then divided by 100 to arrive at indexed cost of acquisition of land.
With respect to such buildings constructed prior to 01-04-2001 the guideline value for entire building as on 01-04-2001 can be taken as entire buildings will have to be demolished and by multiplying index point for the year in which transfer is made and dividing by 100 indexed cost can be ascertained.
If there had been improvements to the buildings after 01-04-2001 supported by vouchers and bills then indexed cost of improvements can be ascertained by multiplying such improvement by index point pertaining to the year of transfer and dividing the year in which improvements have taken place. Had there been improvements in more than a year then indexed cost of improvements can be ascertained for each of the years.
The total indexed cost of land and buildings can be arrived by totalling all the figures as explained in previous paragraphs. This can be designated as B1.
If the property had been acquired through purchase/acquisition after 01-04-2001 it would present no difficulty as the cost of acquisition of land and cost of construction of building if land had been purchased and construction activities had taken place separately would be available and in case the building/flat had been purchased then also figures would be available from the sale deed (purchase document) This value can be designated as B2.
It is also advisable to have the property valued to arrive at cost of acquisition/construction.
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