Treatment of non refundable earnest money received

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

01 April 2013 I want to know about the tax treatment of the Non-refundable Earnest money received by the land owner from the land developer after execution of the land collaboration agreement & the flats/township is expected to be completed in 2015 end. Is it a capital gain to be deposited in the capital gain account or is there any restrictions on its Utilization. How can it be dealt with & what are the consequences if it is utilized in contradiction with the law. please suggest me with your superb advice?

Also suggest me any book regarding this?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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23 May 2013 The moment you have signed a development agreement the provisions of Capital Gains will come into force and non refundable EM is to be treated as part of the consideration. You have calculate CG tax as the case may be LTCG or STCG and accordingly you have to pay the tax. Now, if the builder gives you the flats then you can take the help of Section 54F but to the extant of how many flat?

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Querist : Anonymous

Querist : Anonymous (Querist)

23 May 2013 But Sir how can we calculate the capital gain as the sale consideration is not defined and the purchase consideration is also not clear as it was an ancestral property.

Isn't it a capital receipt therefore not taxable.

There is not a clear way to calculate the capital gain.

The whole tax issue will come into picture after the flats are alloted and put on sale after that.?

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