Selling multiple units, developer floors, or units from JDA? Does the tax come under capital gains or business income?
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Trends in urbanisation continued at a rapid pace in India. More and more people redeveloping their real estate assets and getting them converted to multi-dwelling units. When selling such, does the income arise from the sale is considered as a capital gain or business income ?
A particular asset will be treated as stock in trade or capital asset based on the manner in which it is held. The same item can be stock in trade in the hands of the taxpayer who deals in that item or capital asset if the taxpayer uses it for earning income or holds as an investment.
The stock in trade may become capital asset in certain circumstances or vice versa.
Mr Rama purchased a land in May 2010 at a cost of Rs 35 lakhs for investment purpose. He started his real estate business on 01st Aug 2020 and converted the land into stock in trade of his business on 01st Aug 2020. Later he constructed a flat with a cost of Rs 10 lakhs on the land and sold it for Rs 1 crore on 15th Mar 2022. In this case
In this case also, the intent of the taxpayer is important to show as business or Capital Gains.
If the taxpayer is investing in the properties with the investment purpose, he needs to show under capital gains and claim reinvestment option. Otherwise he needs to show as business income and claim expenses