*******Capital Gains Taxation under JDAs: Section 45(5A) vs Section 67(14)–(16)

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Capital Gains in Joint Development Agreements – A Comparative Analysis of Section 45(5A) (Income Tax Act 1961) and Section 67(14)–(16) (Income Tax Act, 2025)

Introduction: Joint Development Agreements (JDAs) in real estate present unique challenges for capital gains taxation. Historically, entering a JDA could trigger capital gains tax for the landowner when the agreement was signed, because the transfer of development rights with possession could qualify as a “transfer” under income tax law (via Section 2(47)(v)) even if no money was received upfront. This led to hardship: landowners faced tax liability in the year of the JDA, despite not having received sale proceeds (only a promise of future constructed area). To alleviate this, the Finance Act 2017 introduced Section 45(5A) into the Income-tax Act, 1961, deferring taxation to the year the project is completed. Now, with the enactment of the Income-tax Act, 2025 (effective from April 1, 2026), these provisions have been substantively carried forward in Section 67(14)–(16).

This article provides a clause-by-clause comparison of old and new provisions, analyzes timing of charge, full value of consideration (FVC), exceptions, and computation of gains, with illustrative examples. It also discusses pre-completion transfers, phase-wise completion certificates, cost allocation between land and building, TDS compliance, practical challenges (with case law like Balbir Singh Maini and Vembu Vaidyanathan), and offers a documentation checklist. The discussion is oriented for tax practitioners, using statute-focused language and a narrative flow as befits a professional tax journal.

I.  Statutory Framework

A. Section 45(5A) of ITA 1961 – Text and Context

Bare provision (ITA 1961): Section 45(5A) provides a special rule for capital gains on transfer of land or building under a JDA. In full, it reads:

“Notwithstanding anything contained in sub-section (1), where the capital gain arises to an assessee, being an individual or a Hindu undivided family, from the transfer of a capital asset, being land or building or both, under a specified agreement, the capital gains shall be chargeable to income-tax 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; and for the purposes of section 48, 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:

Provided that the provisions of this sub-section shall not apply where the assessee transfers his share in the project on or before the date of issue of the said certificate of completion, and the capital gains shall be deemed to be the income of the previous year in which such transfer takes place, and the provisions of this Act, other than the provisions of this sub-section, shall apply for the purposes of determination of full value of consideration.”

Explanation.—For the purposes of this sub-section, the expression—

(i) “competent authority” means the authority empowered to approve the building plan by or under any law for the time being in force;

(ii) “specified agreement” means 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;

(iii) “stamp duty value” means the value adopted or assessed or assessable by any government authority for the purpose of payment of stamp duty in respect of an immovable property being land or building or both.”

In essence, Section 45(5A) defers the year of charge of capital gains to the year the project receives a completion certificate (CC) from the competent authority (even if the JDA was signed earlier). It also defines the consideration for such transfer: the stamp duty value (SDV) of the landowner’s share in the completed project on the date of CC, plus any cash consideration received. This SDV-based valuation substitutes the usual sale consideration for computing capital gains under Section 48. The provision expressly applies only to individual or HUF landowners, and only when the JDA is a “specified agreement” i.e. a registered development agreement. If these conditions are met, the landowner is taxed not in the year of entering into the JDA, but in the year of project completion.

Legal context and rationale: The insertion of Section 45(5A) was a response to contentious litigation and genuine hardship faced by landowners in JDAs. Under the general rule (Section 45(1) read with Section 2(47)), many courts had held that a JDA, coupled with handing over possession to the developer, triggers capital gains in the year of the agreement, even if the landowner only receives future allotment of flats. For instance, in CIT v. Balbir Singh Maini (2017), the Supreme Court noted that where a development agreement is not registered, it “shall have no effect in law” under Section 53A of the Transfer of Property Act, and thus no “transfer” occurs. This implied that if a JDA was registered, a transfer could be recognized immediately – a result that often left landowners with a tax bill long before any real proceeds or property was received.

The Finance Act, 2017 introduced Section 45(5A) to mitigate this by aligning the tax event with the project’s completion. The CBDT, in its Explanatory Circular No. 2/2018, highlighted that this provision “takes care of such hardship” and defers taxation till the completion certificate is issued, rather than the JDA signing date. In effect, Section 45(5A) provides a statutory deferral of capital gains for specified JDAs, ensuring tax is levied when the landowner actually receives a finished asset (and potentially cash), which is a realizable value.

Notably, Section 45(5A) also contains a proviso (exception): if the landowner transfers his share in the project to someone else before the completion certificate is issued, then the deferral is forfeited and the normal provisions apply. In other words, if the landowner sells the under-construction property/rights or otherwise exits the project early, the capital gains on that transfer will be taxed in that year (and determined per regular rules, not by deeming CC-year SDV). We will examine this scenario in detail in Section III and IV below.

B. Section 67(14)–(16) of ITA 2025 – Continuity and Changes

The new Income-tax Act, 2025 reorganizes the capital gains provisions (Chapter IV of the new Act) but carries forward Section 45(5A)’s substance into Section 67, sub-sections (14) to (16). The wording is updated for clarity and cross-references, but the core mechanism remains. For completeness, the text of Section 67(14)–(16) (as enacted in 2025) is quoted below:

Section 67(14) – “Irrespective of anything contained in sub-section (1), if the capital gains arises to a person (being an individual or a Hindu undivided family) from the transfer of a capital asset, being land or building or both, under a specified agreement, then –

(a) such capital gains shall be chargeable to income-tax for the tax year in which the certificate of completion for the whole or part of the project is issued by the competent authority; and

(b) for the purposes of section 72, the stamp duty value, on the date of issue of the said certificate, of the share of such person, being land or building, or both, in the project, as increased by any consideration received in cash or by a cheque or draft or by any other mode, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.”

Section 67(15) – “In sub-section (14) –

(a) ‘competent authority’ means the authority empowered to approve the building plan under any law;

(b) ‘specified agreement’ means 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.”

Section 67(16) – “The provisions of sub-section (14) shall not apply if the person transfers his share in the project on or before the date of issue of the certificate of completion, and then – (a) the capital gains shall be deemed to be the income of the tax year of such transfer; and (b) the provisions of this Act, other than sub-section (14), shall apply for the purpose of determination of full value of consideration.”

These provisions in ITA 2025 echo the language of old Section 45(5A) almost verbatim, with a few updates:

In essence, there is no substantive change between Section 45(5A) of the Income-tax Act, 1961 and Section 67(14)–(16) of the Income-tax Act, 2025. The provisions have simply been recast in clearer drafting:

  • “Previous year” has been replaced with “tax year.”
  • The computational cross-reference has been updated (Section 48 → Section 72).
  • Definitions of competent authority and specified agreement are moved into a separate sub-section.
  • The proviso on pre-completion transfers is restated as Section 67(16).
  • Related provisions (like Section 50C → Section 78) have been renumbered.

Substance, scope, and practical outcome remain unchanged. The redrafting serves only to simplify language and align section numbering in the new Act.

II.  Scope and Preconditions for Applicability

Before applying Section 45(5A) or Section 67(14), one must ensure the arrangement meets certain threshold conditions:

Eligible Assessee: The transferor must be an individual or an HUF. JDAs involving companies, firms, etc., are not covered by these special provisions; those taxpayers continue to be governed by normal capital gain rules. For instance, if a company or partnership enters a JDA, capital gains timing is determined under Section 45(1) (typically on transfer of possession rights) without the benefit of deferral.

Capital Asset Type: The asset given by the landowner must be land or building or both, held as a capital asset (not stock-in-trade). Typically, this is the landowner’s undivided share (UDS) in land and accompanying development rights. After development, the landowner receives built-up area (flats, etc.) in exchange for that UDS. If the land was actually held as stock (e.g., by a real estate dealer), Section 45(5A) wouldn’t apply since the gains would fall under business income. “Specified Agreement”: The JDA must be a registered agreement. This is crucial – an unregistered development agreement will not qualify for Section 45(5A).

In fact, as per property law, an unregistered contract with possession transfer is not protected under Section 53A of the Transfer of Property Act (post-2001 amendment), and thus may not even count as a “transfer” under Section 2(47)(v).

The Supreme Court in Balbir Singh Maini underscored that an unregistered JDA “shall have no effect in law” for purposes of Section 2(47)(v). Practically, many landowners deliberately did not register JDAs to avoid early taxation – but this also meant Section 45(5A) wouldn’t apply. In any case, to avail the deferral under 45(5A)/67(14), registration is mandatory. Nature of Consideration: The arrangement should be such that the landowner receives a share in the developed project (in form of apartments or developed plots, etc.) – with or without additional cash consideration. This aligns with the typical area-sharing JDA model. Pure monetary consideration JDAs (where the developer pays only cash and no share in project) are effectively outright sales and would not need this special treatment.

Section 45(5A) was designed for land-for-buildings barter scenarios accompanied possibly by some cash.

If all these conditions are satisfied, the special tax regime kicks in. If any condition fails (e.g., the landowner is a company, or the agreement is not registered, or the owner is selling only for cash), then Section 45(5A)/67(14) does not apply and one falls back on the normal provisions (which usually tax at the time of “transfer” as defined in Section 2(47)).

Two additional points of characterization merit mention:

What exactly is “transferred” in a JDA? Typically, at the JDA’s inception, the landowner transfers a proportionate interest in the land to the developer (to enable development) in exchange for a right to obtain finished units in the future. This is often structured as the landowner conveying some % of Undivided Share (UDS) in the land to the developer or third-party buyers progressively. The in-kind consideration (flats/units) materializes only upon construction. For tax purposes, one can view the landowner as transferring part of his land rights and in return acquiring rights in the new building.

However, Section 45(5A) avoids this complexity by deferring tax until the end and valuing what the landowner ultimately gets.

Completion Certificate (CC) could be for whole or part of project: The law specifies tax is triggered when “the certificate of completion for the whole or part of the project is issued”. This means if the project is completed in phases and the authority issues a CC for, say, Tower A (out of A & B), the capital gains on the portion of the landowner’s rights pertaining to Tower A becomes chargeable in that year itself. Each phase’s CC can trigger taxation on a pro-rata basis of what is completed. This is an important practical point – one cannot wait for 100% project completion if authorities certify part of the project earlier (we will illustrate this in Example 2).

With the groundwork laid on what arrangements qualify, we proceed to analyze when and how the capital gains are computed under these provisions.

III.  Timing of Charge (Year of Taxability)

The primary relief of Section 45(5A)/67(14) is on the timing of capital gains taxation. In a typical JDA scenario with no intermediate transfers, the rule is straightforward:

Default rule (no pre-completion transfer): The capital gain is chargeable in the year in which the completion certificate (for the whole or part of the project) is issued. This could be several years after the signing of the JDA. The timing is pinned to the first handing over of a completed portion of the project to the landowner (or issuance of CC).

However, there are two key deviations to consider:

(a) Pre-Completion Transfer by Landowner: If the landowner sells or transfers his rights/ share in the project before the completion certificate, the deferral under 45(5A) ends at that point. The law explicitly carves this out: Section 45(5A) “shall not apply” in such cases (Section 67(16) in new Act). This typically happens in one of two ways: – The landowner might sell a part of his entitlement (say, one flat out of the several he is to receive) to a third-party buyer before project completion, via a sale deed or assignment. – Or the landowner transfers all his remaining rights to the developer or a third party (essentially cashing out before getting physical units).

In such events, the year of transfer of those rights/UDS will be the year of charge for that portion. The capital gains must be computed under the normal rules (Section 45(1), with Section 50C or now Section 78 for value, etc.) in that year. We will see in Part IV and the examples how to compute gains in this scenario and how it affects the remaining tax computation.

(b) Unregistered JDAs: Although not explicitly a part of Section 45(5A) (since it only applies when registered), it’s worth noting that if the agreement is unregistered and mere permission is given to developer to enter the land, many tribunals and courts have held this does not amount to a “transfer” in that year due to the absence of a valid Section 53A contract. In such a case, until a registered conveyance happens (e.g., when the landowner eventually gets allotment of flats and a sale deed for them, or sells land rights via a registered deed), the clock for capital gains may not start at JDA signing at all. Thus, an unregistered JDA often results in taxation only on subsequent registered events. Practitioners should not mistakenly apply 45(5A) to an unregistered JDA or trigger tax prematurely – the transaction may simply fall outside 45(5A) and wait for normal

To summarize timing: – If JDA registered & no prior sale: Tax in CC year (per special provision). – If any part sold by landowner before CC: That part taxed in year of sale (general provisions), and only the remainder will be taxed in CC year. – If JDA unregistered: Tax on whatever later event constitutes a transfer (outside 45(5A) scope).

In any case, by the end of the project, when the landowner has received all his due (flats/area and cash), all portions of the capital gain would have been taxed in one or more stages. The key is identifying which year each portion gets taxed.

Next, we examine how to compute the Full Value of Consideration (FVC) and gains under both the deferred scenario and the normal scenario.

IV. Full Value of Consideration (FVC) and Consideration Issues

A central issue in computing capital gains under Joint Development Agreements (JDAs) is identifying the full value of consideration (FVC). Since JDAs typically involve part in-kind (constructed area) and sometimes part cash, the law prescribes special rules to avoid valuation disputes.

A. When Section 45(5A) / 67(14) Applies (No Pre-CC Transfer)

  • In the deferred-tax scenario, FVC is deemed to be:

FVC = Stamp Duty Value (SDV) of landowner’s share on the date of the Completion Certificate (CC) + any cash received.

  • Practical Application:
    • Obtain the SDV of the flats or units allotted to the landowner on the CC date (unit-wise or parcel-wise).
    • If CC is granted only for part of the project, take SDV for that part alone.
    • Add any cash consideration received under the JDA.
  • Benefit of this Rule:
    • No exposure to Section 50C/78 at the time of JDA signing.
    • The law pegs consideration to a future date (CC date), ensuring taxation aligns with actual value realization.

B. When the Landowner Makes a Pre-CC Transfer

If the landowner sells part of his entitlement before completion (e.g., one flat or part of undivided land share), the transaction is taxed under normal provisions in that year.

  • Step 1: Identify Asset Transferred
    • Usually, this involves transfer of proportionate UDS in land plus associated development rights.
    • Sale deeds are often tripartite (landowner, developer, buyer).
  • Step 2: Apply Section 50C (ITA 1961) / Section 78 (ITA 2025)
    • FVC is the higher of:
      • Declared consideration from buyer, or
      • SDV on the date of sale (with 110% safe-harbour tolerance).
    • Agreement-date SDV may be substituted if advance was received via banking channels before agreement.
  • Example:
    • Sale consideration from buyer: ₹50 lakh.
    • SDV on sale date: ₹60 lakh.
    • Since SDV exceeds declared price and tolerance, FVC = ₹60 lakh.
  • Step 3: Treatment of Developer’s Cash Component
    • Cash consideration from developer under JDA remains taxable under Section 45(5A)/67(14) in the CC year (unless entire rights are sold beforehand).
    • Thus, buyer’s payment is taxed immediately; developer’s payment is taxed later, avoiding double counting.

Summary

  • No pre-CC transfer: FVC = SDV on CC date of landowner’s share + cash.
  • Pre-CC transfer: FVC = Declared buyer’s price or SDV (whichever higher, with tolerance).
  • Cash from developer: Always brought to tax under the JDA special rule (CC year), not mixed with third-party sale receipts.

V. Cost of Acquisition and Indexation Considerations

Under both the Income-tax Act, 1961 and the Income-tax Act, 2025, the deduction available against capital gains is the proportionate original cost of the land (with indexation if long-term). The key challenge is how to apportion this cost when the land is taxed in parts — for example, if the landowner makes pre-completion sales or if the project receives completion certificates in phases.

Base Principle

The indexed cost to be deducted must correspond to the exact portion of land/rights transferred in that year. In JDAs, where the land is exchanged for a share in developed property, this requires splitting the land cost between different tranches of transfer.

Structured Method of Cost Allocation

1.Determine total land and saleable area

    • Example: Raw land = 65,000 sq.ft.; Saleable built-up area = 21,000 sq.ft.

2. Compute UDS per sq.ft. of built-up area

    • Formula: Total land ÷ Total saleable area.
    • In the example: 65,000 ÷ 21,000 = 3.0952 sq.ft. of land per 1 sq.ft. of built-up area.

3. Identify land/UDS proportion sold or completed

    • Pre-completion sale: If 1,000 sq.ft. is sold, land transferred = 1,000 × 3.0952 = 3,095.2 sq.ft.
    • Phase completion: If 40% of project is certified, land attributable to that = 40% of total UDS.

4. Apportion cost accordingly

    • Multiply indexed cost of entire land by the fraction transferred.
    • Example: If indexed cost of 65,000 sq.ft. = ₹1 crore, then cost for 3,095.2 sq.ft. = (3,095.2 ÷ 65,000) × ₹1 crore = ₹4.76 lakh.

5. Apply indexation

    • Apply Cost Inflation Index (CII) up to the year of transfer (sale year or CC year).
    • Under ITA 1961: CII schedule applies.
    • Under ITA 2025: Section 72 continues the same principle, with updated numbering.

6. Residual cost carried forward

    • Once cost is apportioned to a tranche (e.g., a pre-CC sale), reduce that portion from the balance.
    • In the CC year, deduct only the remaining proportionate cost for the balance unsold/uncertified share.

7. Include improvements where applicable

    • If the landowner has incurred approval fees, land levelling, or development costs, these can be capitalised and indexed.
    • Construction costs borne by the developer are not part of landowner’s cost.

Key Practical Notes

  • No double counting: Each sq.ft. of land cost must be claimed exactly once, whether against a pre-CC sale or CC-year taxation.
  • Detailed indexation schedule: Maintain a worksheet with acquisition year, improvement costs, and CII factors year by year.
  • Phase-wise reconciliation: Land area, saleable area, and corresponding cost should be reconciled at every stage to avoid errors.

Summary

In JDAs, correct cost allocation is critical. Practitioners should:

  • Use the UDS-per-sq.ft. method to link each sale or phase of completion to the underlying land.
  • Apply indexation up to the year of transfer.
  • Maintain a phase-wise reconciliation so that at each taxable event, the correct portion of cost is deducted.

This ensures that gains are computed fairly, without duplication or omission, and provides a defensible working paper in case of scrutiny.

VI. Worked Examples (Illustrative Scenarios)

Common Facts

  • Raw land area: 65,000 sq.ft.
  • Saleable (built-up) area after development: 21,000 sq.ft.
  • Landowner’s share: Entire 21,000 sq.ft. (self-development scenario, or focusing only on landowner’s portion).
  • Undivided Share (UDS) per 1 sq.ft. of built area: 65,000 ÷ 21,000 = 3.0952 sq.ft. of land.
  • Indexed cost per sq.ft. of land: ₹C (symbolic, varies with acquisition year and CII).
  • JDA consideration: Pure area-sharing, no cash from developer.
  • Note: Landowner sells a small portion of rights before project completion.

Example 1: Pre-Completion Sale of 1,000 sq.ft.

1.Asset transferred:

    • 1,000 sq.ft. under-construction unit sold to a third-party buyer.
    • Corresponding land UDS = 1,000 × 3.0952 = 3,095.2 sq.ft.

2. Full Value of Consideration (FVC):

    • Under ITA 1961 (FY 2025-26): Section 50C applies.
      • If declared price = ₹30 lakh; SDV = ₹32 lakh.
      • FVC = ₹32 lakh (since > 105%/110% of declared).
    • Under ITA 2025 (post-April 2026): Same rule, Section 78.

3. Cost of acquisition:

    • Proportionate indexed cost = 3,095.2 × ₹C.
    • If ₹C = 100, cost = ₹3,09,520.

4. Capital gain computation:

    • LTCG = FVC – Indexed cost – Expenses.
    • ₹32,00,000 – ₹3,09,520 = ₹28.91 lakh (approx.).

5. Impact on subsequent CC taxation:

    • Remaining share = 20,000 sq.ft.
    • On CC, Section 45(5A)/67(14) applies only to remaining 20,000 sq.ft.
    • Avoids double taxation of the 1,000 sq.ft. already sold.

Example 2: Phase-wise Completion (40% Project CC)

1.Portion certified complete:

    • 40% of 21,000 = 8,400 sq.ft.
    • Of this, 1,000 sq.ft. already sold.
    • Net landowner’s share now ready = 7,400 sq.ft.

2. FVC (CC date):

    • Deemed FVC = SDV of 7,400 sq.ft. on CC date.
    • If SDV = ₹5,000/sq.ft., FVC = 7,400 × 5,000 = ₹3.70 crore.

3. Cost allocation:

    • UDS = 7,400 × 3.0952 = 22,904.5 sq.ft. of land.
    • Indexed cost = 22,904.5 × ₹C.
    • If ₹C = 110, cost ≈ ₹25.2 lakh.

4. Capital gain:

    • LTCG = ₹3.70 crore – ₹0.252 crore = ₹3.448 crore.
    • Eligible for exemptions u/s 54, 54F, 54EC. Timelines count from CC year.

5. Future phases:

    • Balance 60% of project taxed on completion of subsequent phases (or earlier, if sold).

Key Takeaways

  • Pre-completion sale: Taxed immediately under Section 50C/78.
  • On completion certificate: Remaining portion taxed under Section 45(5A)/67(14) at CC date SDV.
  • No double taxation: Already-sold portion excluded from CC-year tax.
  • Exemptions: Section 54/54F/54EC can be planned with CC year as the “year of transfer.”

VII. Compliance and Withholding Provisions

TDS on Monetary Consideration (Section 194-IC, ITA 1961):

  • Where a developer pays cash consideration to a landowner under a JDA, TDS at 10% must be deducted under Section 194-IC.
  • There is no threshold – even ₹1 of cash consideration attracts TDS.
  • Example: If cash consideration is ₹50 lakh, the developer must deduct ₹5 lakh as TDS and issue Form 16B. The landowner gets credit in Form 26AS.

No TDS on In-kind Consideration:

  • The landowner’s share in the developed property is not a “payment” and hence not subject to TDS.
  • This in-kind component is taxed later as capital gains when the completion certificate (CC) is issued.

Benefit of TDS to Landowner:

  • TDS deducted on cash provides a credit even if the corresponding capital gain is taxed later at the CC stage.
  • The landowner must claim or carry forward such TDS credits appropriately.

Reporting in Income Tax Return (ITR):

  • Cash receipts may not be taxable immediately if Section 45(5A) defers capital gains to CC year.
  • However, the landowner should disclose the JDA transaction in the ITR, mention the TDS, and carry forward/adjust the credit.
  • In the year of CC, the capital gain must be reported and the earlier TDS credit adjusted.

ITA 2025 Regime (Section 67(14)):

  • TDS provisions are expected to be consolidated.
  • Payments under “specified agreements” (cash component) will likely remain subject to 10% TDS with no threshold, similar to Section 194-IC.
  • Until ITA 2025 becomes operative (from 1 April 2026), Section 194-IC continues to apply.

Other Compliance:

  • Stamp duty and registration must be completed for any sale deeds executed (e.g., pre-CC sales).
  • Practitioners should ensure proper record-keeping of such registered documents to evidence land transfer and valuation.

 Good Practice for Practitioners:

  • Ensure developer deducts TDS and quotes the landowner’s PAN.
  • Landowners should verify TDS credits in Form 26AS/AIS.
  • Reconcile cash consideration, TDS deducted, and final tax liability in working papers.

VIII. Documentation and Working-Paper Checklist for Practitioners

Registered JDA:

  • Keep a copy of the registered development agreement.
  • Verify it qualifies as a “specified agreement” (parties, terms, registration).
  • Note execution date, registration date, and competent authority jurisdiction.

Approved Plan & Competent Authority:

  • Obtain sanctioned building plan.
  • Identify authority responsible for issuing the completion certificate.

Area Allocation Statements:

  • Prepare reconciliation: land area ↔ saleable area ↔ UDS per unit ↔ landowner’s share.
  • Break down phase-wise if multiple CCs are expected.

Stamp Duty Value Evidence:

  • Pre-CC sales: secure sub-registrar valuation/sale deed showing SDV.
  • CC date: obtain Ready Reckoner/valuation certificate for landowner’s share.

Indexation Schedule:

  • Document acquisition cost, year of purchase, improvements.
  • Compute indexed cost for each potential transfer year.

TDS Compliance (Section 194-IC):

  • Confirm 10% TDS deduction on cash paid by developer.
  • Collect Form 16B or reconcile via Form 26AS.
  • Ensure milestone-based payments are fully covered.

Exemption Planning Documents:

  • Track timelines for reinvestment (Section 54, 54F, 54EC).
  • Retain purchase deeds, bond receipts, etc.

Case Law & Circulars:

  • Keep copies of key rulings (e.g., Balbir Singh Maini, Vembu Vaidyanathan).
  • Retain CBDT Circular No. 2/2018 for explanatory backing.

IX. Conclusion and Professional Takeaways under the 2025 Regime

The introduction of Section 45(5A) in 2017 marked a turning point for individual and HUF landowners entering Joint Development Agreements (JDAs). It aligned taxability with real value realization at project completion rather than at the signing of development agreements. The Income-tax Act, 2025, through Section 67(14)–(16), preserves this beneficial regime almost verbatim, ensuring continuity and stability for real estate transactions.

Core Outcomes

  • Deferral of taxation: Gains are taxed on completion of the project (whole or part), not at agreement execution.
  • Valuation at completion: Taxable value is pegged to stamp duty value (SDV) at CC, reflecting fair market conditions.
  • Pre-completion transfers taxed normally: Early monetisation (e.g., unit sales before CC) is outside the deferral and taxed under general provisions.

Practitioner’s Key Takeaways

1.Pin the correct transfer year – Every sale or CC issuance must be slotted into the right year. Missteps can invite interest and penalties.

2.Compute cost rigorously – Use the UDS-per-sq.ft. method for cost allocation; errors in indexing or ratios can materially distort taxable gains.

3. Maintain valuation evidence – Official SDV documents (for both pre-CC sales and CC dates) are critical to defend deemed consideration adopted.

4. Plan for exemptions – Deferral can bunch large gains into one CC year. Anticipate exemption strategies (Sections 54, 54F, 54EC) in advance; structure staggered sales if it helps optimize relief.

5. Stay alert to law updates – Watch for changes in safe-harbour tolerance, indexation rules, or consolidated TDS procedures under ITA 2025.

6. Document everything – Maintain working papers, reconciliation statements, and supporting documents phase by phase. This ensures both accurate compliance and defensibility in assessments.

Closing Note

JDAs combine complex timing rules with nuanced cost allocation. While Section 45(5A) and its successor Section 67(14)–(16) simplify and defer taxation, they do not dilute the ultimate charge – every bit of value is eventually taxed. The professional’s role is to ensure that taxation is precise, timely, and defensible. With disciplined record-keeping, careful planning, and phase-wise reconciliation, practitioners can help landowners navigate JDAs efficiently, ensuring no more and no less than the rightful tax liability.

References

  • Income-tax Act, 1961, Section 45(5A). Income-tax Act, 2025, Section 67(14)–(16).
  • Income-tax Act, 1961, Section 48, Section 50C, Section 194-IC. Income-tax Act, 2025, Section 72, Section 78.
  • CIT v. Balbir Singh Maini (2017) 398 ITR 531 (SC). Vembu Vaidyanathan v. CIT (2019) 413 ITR 248 (Bom).
  • Chaturbhuj Dwarkadas Kapadia v. CIT (2003) 260 ITR 491 (Bom). CBDT Circular No. 2/2018.

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