Joint Development Agreement

What is Joint Development Agreement?

The joint development agreement is a type of arrangement between the landowners and the developers. This agreement states that the owner grants the land to the builder without transferring ownership, and the builder will develop the apartments or flats on that piece of land and be responsible for all aspects of the development.

The developer's duty includes getting the legal permission, marketing of the property, registering the flats, etc. The joint development agreement for real estate is more like a barter system because, after the flats are completely built, the owner will get the number of flats mentioned in the agreement or their share of the money earned by selling these flats.

Taxability of Income comes from JDAs in India.

The taxation of joint development agreements is in the hands of the owner and the developer.

1. Taxability depends on the owner of the Property

The taxation of capital gain on a joint development agreement consists of three key aspects: the value of consideration, the cost of acquisition, and the year for taxation.

• Full Value of Consideration (FCV): It consists of the Stamp duty value of the property received on the date of issue, as mentioned on the Completion certificate, and the cash received (if any).
• Cost of Acquisition: It refers to the price of the land at the time of purchase. If the owner has had the land for more than 2 years, then the cost must be indexed till the year of land transfer.
• Year of Taxability: You have to pay the taxes on the Capital Gains in the year in which the building project is completed or the certificate of completion is issued.

2. Taxability depends on the developer of the Property

The income tax on joint development agreement for the builders or developers will be considered as per the " Income from Business and Profession". For them, such properties are considered stock-in-trade.

The income that comes from the sale of such property would be taxable. The developers are allowed to deduct the business expenses that are used in the development of such property.