s.45(5A) — Capital gains on a joint development agreement
Capital gains of an individual or Hindu undivided family transferring land or a building under a registered joint development agreement are taxed in the completion certificate year, on the stamp duty value of the share plus cash.
Inserted by section 22 of the Finance Act, 2017 with effect from 1 April 2018. The words any consideration received in cash or by a cheque or draft or by any other mode replaced the consideration received in cash, if any, by the Finance Act, 2023 with effect from 1 April 2024. The counterpart in the Income-tax Act, 2025 is section 67(14) to (16).
Income-tax Act, 1961
s.45(5A)
Income-tax Act, 2025
s.67(14)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 45(5A) of the Income-tax Act, 1961 provides that where the capital gain arises to an assessee being an individual or a Hindu undivided family from the transfer of a capital asset, being land or building or both, under a specified agreement, the gain is chargeable as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority, and the stamp duty value of the owner's share on the date of that certificate, increased by any consideration received in cash or by cheque, draft or any other mode, is deemed to be the full value of consideration for section 48. The proviso disapplies the sub-section where the owner transfers the share on or before the date of the completion certificate, the general provisions then applying in the year of that transfer. A specified agreement is a registered agreement in which a person owning land or building or both agrees to allow another person to develop a real estate project on it in consideration of a share, being land or building or both in the project, with or without part payment in cash. The sub-section was inserted by the Finance Act, 2017 from 1 April 2018. Section 194-IC requires deduction of ten per cent on monetary consideration under such an agreement. The counterpart in the Income-tax Act, 2025 is section 67(14), with the definitions in section 67(15) and the proviso in section 67(16).
What the provision does
Moves the year of charge on a joint development agreement from the year of transfer to the year of the completion certificate, and fixes the consideration as the stamp duty value of the owner's share on that date plus monetary consideration, so that the owner is taxed when the share exists. It applies only to individuals and Hindu undivided families under a registered agreement; it does not apply to a company, firm or cooperative society, and it does not govern the developer's income.
Threshold questions
- Is the transferor an individual or a Hindu undivided family, and not a company, firm, limited liability partnership or cooperative society
- Is the asset land or building or both held as a capital asset
- Is the agreement registered, and is the consideration a share in the project, with or without cash
- Has the owner transferred the share on or before the date of the completion certificate, which takes the case out of the sub-section
- What was the stamp duty value of the owner's share on the date the completion certificate was issued
In practice
The recurring disputes.
Whether a member of a cooperative housing society can be within the sub-section in a redevelopment
In a society redevelopment the development agreement is usually signed by the society, which is not an individual or a Hindu undivided family, while each member surrenders a flat under a separate registered permanent alternate accommodation agreement in return for a new flat. The argument that a member is within the sub-section is that the member is an individual owning a building who, under a registered document, gives it up so that a project can be developed in consideration of a share in that project. The argument that the member is outside it is that the agreement that allows another person to develop is the society's, that the member's own document does not itself allow anyone to develop anything, and that the Mumbai Tribunal treats the member's new flat as a continuation of the old asset rather than a share received for a transfer. No decision on the point was traced.
Whether hardship compensation and rent are consideration within the sub-section
The sub-section adds monetary consideration to the stamp duty value of the owner's share. The Revenue's argument is that every sum the developer pays the owner under the agreement is consideration. The owner's argument, accepted by the Mumbai Tribunal in Nathani Parekh Constructions in July 2024 and N Rose Developers in January 2025 in the context of section 194-IC, is that alternate accommodation charges and hardship allowance compensate for dispossession and are not paid as part of a share in the land or building. Genuine cash paid with the share under a joint development agreement is consideration, as the Tribunal held in Sugee Seven Developers in October 2025.
The completion certificate and a partial certificate
The charge falls in the year the certificate for the whole or part of the project is issued. The owner's argument where a part certificate covers units other than the owner's is that the share has not come into existence and the charge waits for a certificate covering it. The Revenue's argument is that the words whole or part of the project fix the first certificate, whatever units it covers. The words admit both readings, and no decision resolving them was traced.