Redevelopment project taxation

 

(Querist)
23 May 2019

Sr. No. Points Solution / Remarks
Facts of the case
1 In a building there are three Joint landlord (co-owner) having eight tenants

2 Out of three owner of building – two are also tenant in the same building

3 All the tenants agreed for certain conditions for redevelopment.
So landlords want to redevelop the Building consisting of 15 flats, out of which 7 are saleable and balance 8 will be given to the tenants.

4 IOD received in the name of Devraj & others ( Devraj in one of the three landlord)
4 Purchased cost of building is Rs. 12L

5 At present market value of building is 100L

6 Tenant will get exemption U/S. 54F for receiving new flat against surrendering tenant-ship rights.
Issues
1.a Now which situation is better for tax saving (LTCG, GST & normal income tax on business of development)
1.b What would be the implication for redevelopment project for following options:-
 Open a Partnership firm and transfer land rights by landlord to firm and develop building under firm.
Issue
a) JDA has to be prepared & Stamp duty cost @ 6% on market value of Land + GST @ 12% / 5% on JDA
b) Also, which sub option would be better for JDA:-
a. Revenue Sharing
b. Area Sharing
 If, Self-development by land lords ( preferred by me to go )
We can save Stamp duty +GST (on JDA as mentioned in pt. (i)).
However, in current scenario there are three landlords, then how to get GST registration? Since, GST is PAN base and also how to distribute cost of project? (Also note 80% cost are from GST registered dealer)
Since we can get RERA registration by clause of co-owner, so there won’t be any issue for RERA.
 What would be the scenario if development done by AOP /BOI status?
a. Also what points to be taken care for, for preparing AOP/BOI Agreement within co – landlords, for such situation?
b. L/B property has to transfer to AOP or not ?
c. Also check while transferring property (if needed as per law) __ Stamp duty + GST applicable or not?
 If Self developed and claim by all three as LTCG of full consideration received by sale of flat:-
• When flat sale under construction and payment received as per slab of work , time of capital gain tax payment ? (what documents has to prepare for LTCG levied on the date of possession or OC) & case law to support your view.
• Can we put clause for LTCG liable after OC received?
• What documents prepared , so ITO never treat this planning to AOP (supported case law)
• Of three land lord _2 opt option for LTCG tax as investor but one convert his share of land to stock in work tax = LTCG+ business any issue on same?
• What care should take on RERA
• Three individual GST number will obtain
• Also open one common joint a/c for common expenses
• Project is one , so any mutual agreement required for sharing of Area in new building
• While RERA registration can we put three draft sale agreements for each co-owner?
• When property sale on initial period, the time of taxability of long term capital gain? Also what clause has to put in the Agreement , to defer tax liability at the time of possession or OC
• Accounting entry for cost of construction for LTCG
 Or any other best issue for tax planning considering LTCG, Income tax, GST & RERA?
Note : Answer the above issue with supporting case law available


Dr J C Vashista (Expert)
24 May 2019

Be brief and specific for obligation of experts.
It would be advisable to consult a local prudent lawyer for better appreciation of facts/documents, analyses, guidance and proceeding.

GRISHMA (Querist)
28 May 2019

Thanks Dr. J C VASHISTA for your valuable advice.
But as a young, I my self want to research in this topic & I want supporting from expert for right path of study of such technical subject.
if possible give me some direction for thought process on the topic or remark some value additions books.
Thanks once again.

GRISHMA (Querist)
28 May 2019

I also request experts to throw some light or direction on above tax planning of LTCG



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