Sale of Residential Buildings under Sec-44AD

[giri gattupalli]

Respected Sir,

One of my client is in construction business. He purchases vacant site and get them registered in favour of him and he constructs house and sells to customers and register in favour of them. During F.Y 2025-26 he sold 5 house properties for sale consideration of Rupees approximately One crore and fifty lakhs and register in favour of them. He is registered under GST and turnover has been disclosed in GST returns.

Please advise me that for the purpose of Income tax return filing the above business can be covered u/s 44AD or whether it is covered under Capital gain. Please advise.

AI Summary

Business income characterization of residential property development generally treats constructed houses held for sale as stock-in-trade.
Residential property development involving purchase of sites, construction of houses and sale to customers is ordinarily business activity. Where properties are acquired, developed and held for sale, they generally constitute stock-in-trade and the profit is taxable as business income rather than capital gains. Registration in the developer's own name is not determinative. Section 44AD may be considered where eligibility conditions are met, subject to verification of the assessee's status, nature and regularity of activity, holding intention, accounting treatment, and receipt details. GST turnover supports business activity but does not determine the income-tax head.