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Redevelopment Projects Tax Implications

Posted: June 9, 2012 | Author: yazdi | Filed under: Redevelopment |1 Comment

Click Here for a detailed analysis and current updates Rent received from developer is taxable - ANISH B MEHTA Member, ICAI, He can be reached at anish.mehta at haribhaktigroup,com Hindustan Times Mumbai September 27, 2007 Swadesh Sachdev: My co-operative housing society plans to go for redevelopment as the building is old and needs to be repaired often. The developer is offering an extra bedroom, about 200 square feet, a corpus fund to the residents and two years rent as they will be staying on rent till the building is ready for occupation. The query is whether we need to pay income tax on,the corpus money we receive and the rent given for staying till the building is redeveloped? Will we be required to pay income tax/capital gain tax if it arises on account of the building providing addition room and if yes, how it is to be worked out? How can the taxes be avoided? Are there any schemes or provisions on this in the income-Tax Act? Our reply is based on the understanding of the limited available facts. Generally, the corpus fund is paid for a specific purpose. The corpus fund is being paid by the developer for the inconvenience caused to you. Hence, on the basis of the decision of the Bombay Tribunal in the case of Lohtse Co-operative Housing Society Ltd vs Seventh Income-tax Officer reported at 51ITD-608, you can contend that the said corpus fund received by you is in the nature of capital receipt. The two years rent receivable-from the developer will be taxable under the head income from other sources. Against the said rent receipt, you can claim deduction for actual rent paid under the provisions of Section 57(iii) of the Income-Tax Act, as an expenditure incurred wholly and exclusively for earning the said income. Under the redevelopment scheme, you would be handing over the possession of the existing flat to the developer for the limited purpose of redevelopment. Thus, there is no transfer of any asset. The date on which the new flat is registered in your name, you would be the owner of the extra 200 square feet area allotted to you, for which the cost would be nil. Capital gain will arise on the sale of new flat. The difference between the amount of sale consideration received by you and the indexed cost of acquisition of the original flat as reduced by expenditure, if any, incurred for transfer of new flat will be your capital gain. If you invest the capital gain on sale of the new flat by purchasing another residential house, then the entire capital gain will not be charged to income tax. What will be the Income Tax treatment of the rent, corpus fund (hardship compensation) and shifting charges paid to a society member by the builder during redevelopment? -K G Kutty DNA 21 May 2011 As per the many latest judgments given by the Income Tax Tribunal, Mumbai, the corpus fund/ Hardship compensation is not taxable as there is no cost of acquisition. In case of rent received during the temporary accommodation, if the entire rent compensation received is for alternative

accommodation, the same is not taxable. In case, no rent is paid or if any amount is saved from the rental part, the same is taxable under income from other sources. Shifting charges will not be taxable as the same will be naturally spent by the member to shift the belongings to the new place. - Ramesh S Prabhu - Chairman, Maharashtra Societies Welfare Association.
http://consumerresources.in/2012/06/14/government-circular-dt-03-01-2009-for-redevelopment-ofhousing-societies/

Government Circular dt. 03.01.2009 for Redevelopment of Housing Societies

Posted: June 14, 2012 | Author: yazdi | Filed under: Redevelopment |1 Comment

Directive under Section 79(A) of Maharashtra Co-operative Societies Act 1960 to all the Cooperative Housing Societies in the State of Maharashtra. Regarding Redevelopment of Buildings of Co-operative Housing Societies The following directive be termed as Directive for Redevelopment of Building of Co-operative Housing Society Salient Features : 1. Requisition for convening Special General Body Meeting for Redevelopment of Societys Building 2. Convening Special General Body Meeting 3. To accept written suggestions from members relating to redevelopment of the building 4. Decisions to be taken in the Special General Body Meeting:5. Providing minutes of Meeting to all members 6. Issuing Appointment Letter to the Architect / Project Management Consultant 7. Work to be done in the initial stage by Architect / Project management consultant 8. Action to be taken on receipt of redevelopment Project Report 9. Preparing List of Bids Received 10. Selection of Developers 11. Agreement to be entered into with Developer