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income tax calculation on sale of flat

CA SHALINI CHOUHAN BHALLA (CHARTERED ACCOUNTANT IN PRACTICE) (101 Points)

25 December 2009

if a man has a piece of land & he makes a contract with a builder to construct 20 flats on it out of which 4 flats would b given to him & he has not sold the land to the builder. Then if he sold the 4 flats then what would be the treatment of such a sale of flat ?

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4 Replies

CA Kanveer Singh Dhingra (Merchant Banker) (193 Points)
Replied 25 December 2009

C.O.A in the hands of contractor will be the cost of construction of building 20 flats.. Purpose he incurred 100000 as cost for its construction but the m.P was 120000 then 20000 would be his tax under p.G.B.P. And if it is his business to also sell houses then his purchase price will be 120000 rest profit or loss under p.G.B.P otherwise his c.O.A wil be 120000 rest gain or loss under capital gain..

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CA Kanveer Singh Dhingra (Merchant Banker) (193 Points)
Replied 25 December 2009

Waise i guess the contractor is providing services,so he will say service tax on the value of services provided by him..The value of services will be the same which he charges from other customers..

RITESH KOTHARI (B.COM, FCA, DISA(ICAI)) (778 Points)
Replied 25 December 2009

The said sale will not be taxed under the head Capital Gains.

It will be taxed under the head PGBP as the nature of transaction is of that.

Bharat Khurana (Student) (153 Points)
Replied 26 December 2009

when he takes 4 flats from the builder it is an exchange of assets and amount to transfer. The Fair Market value of the flat shall be sale consideration and by deducting the cost of land the capital gain shall be chargeable to tax. When flats are sold the cost of acquisition of the flat shall be the fair market value of the flat which was previously taken as sale consideration of land and capital gain shall be calculated.