Paying Tax in Joint Venture with a Builder

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  1. Anoop1984

    Anoop1984 New Member

    I own a piece of land in a corporation limit at Kerala. I wish to enter into a joint venture with a builder to develop the property and share the builtup area in an agreed ratio. When the project is completed I have to sign the title deeds of the flat buyers in the capacity of seller, while the sales consideration is received by the builder for the area allocated to them. I would like to know :

    1. When I sign the document at the registrar office as seller of the flat, will it impose any tax liability on my part as if sales consideration is received by me for their allocated builtup area.

    2. Can you suggest any alternative procedures to safeguard my position in this regard.

    Thanks,
    Anoop
     
  2. Parul_Gupta

    Parul_Gupta Active Member

    1. In the Registrar Office, when you sell the land on behalf of the Builder - the Income Tax Deptt will treat you as the seller and tax would be levied in your hands and not in the hands of the Builder.

    2. In such cases, what people usually do is that they show that they have got the house constructed by the Builder. The Builder gives an Invoice for the Cost of Construction and this Cost of Construction is reduced from the Capital Gains that will arise in your hands on the sale of flats.
     
  3. Anoop1984

    Anoop1984 New Member

    I am extremely grateful for your answers. I need few more clarifications on your reply

    1. “I am not selling the land, but the flat on behalf of the builder”. The agreed deal with builder is that 70% of the builtup area goes to them and the rest 30% would be ours. But for the 70% of the builtup area I have to sign the title deeds in the registrar office as seller while the builder receives the sale consideration. So who is responsible for the tax payment on the profit received by them.

    2. For the second answer, could you please illustrate with an example.

    Kind Regards,
    Anoop
     
  4. Anoop1984

    Anoop1984 New Member

    Please respond to the above query.
     
  5. Parul_Gupta

    Parul_Gupta Active Member

    1. You cant sell on behalf of the builder because legally this is your land and your flat. As you are the legal owner of the flat, the govt will treat you as the seller and tax would be levied in your hands.

    So either you transfer in the name of the builder on completion and then he sells it.

    2. Alternatively, you can show that you have got the house constructed from the builder by paying him a specific amount and he will give you invoices for the same. In that case, when you sell the flat on his behalf - you can show the expenses on construction which will reduce the expenses.

    I hope the solutions shared by me are not complicated.

    In case you require any clarifications, feel free to ask.
     
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