“A” owns a site absolutely and the neighbouring site is owned by “B” absolutely. Both “A” and “B” give their sites for joint development to same builder.
Under the advice of developer, the two sites are amalgamated so as to get more floor area. My query is whether any capital gain tax is attracted when two sites of “A” & “B” are amalgamated.
This is because when sites are amalgamated, “A” gets 50% right in site owned by “B” previously and vice versa. Does it amount to exchange and capital gain tax is payable.
Invite experts opinion on this.
Landowners Face Capital Gains Tax Questions on Joint Development with Builder Under Sections 45, 45(5A), and 194-IC A discussion on capital gains tax implications arises when two landowners, 'A' and 'B,' amalgamate their sites for joint development with a builder. The query concerns whether this amalgamation, resulting in each party gaining rights in the other's property, constitutes a taxable exchange. An expert explains that under section 45, capital gains tax is typically triggered when possession is transferred to a developer. Section 45(5A) stipulates that tax is charged in the year a project completion certificate is issued. Section 194-IC requires developers to deduct TDS on payments to landowners. An example illustrates these provisions, highlighting tax timing and valuation considerations. (AI Summary)
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