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I am a former Government employee. At the time of retirement, I received leave salary of ₹2,00,000 against my unutilised entitlement. May I know what are the tax implications of this amount that was credited to me?
Giridaran
According to Section 10 (10AA) of the Income Tax Act, 1961, leave salary received by a Government employee at the time of retirement (whether on superannuation or otherwise) is fully exempt from tax. Accordingly, the whole of ₹2,00,000 would be exempt from tax in your hands.
I purchased a plot in Pune in 1998. Subsequently, I entered into a registered development agreement with a builder in 2013 with a provision to give 50 per cent of the built up area to me and 50 per cent of the area to go to the builder in lieu of the construction cost. The builder is ready to give me possession of 50 per cent of the area in the form of apartments. Could you guide me about the income tax implications of the transaction?
Subhas
There is no clarity in the tax laws on the point of taxation or the amount of tax liability in the case of joint development agreements. However, one could rely on judicial precedents for understanding the tax implications of your joint development agreement with a builder.
The Allahabad High Court in the case of CIT Vs Smt Najoo Dara Deboo (38 Taxmann.com 258), has pronounced a ruling on a case where the facts were similar to yours. In the said ruling, the High Court has held that capital gains can be charged to tax only on receipt of the sale consideration and not otherwise. Based on this ruling, it can be inferred that you would be liable to pay capital gains tax in the year in which the apartments (being the sale consideration) are registered in your name/possession is handed over to you. Furthermore, if you sell the apartments, this transaction would also be subject to capital gains tax.
However, considering the lack of clarity in the tax laws and diverse views on this subject, it would be prudent to engage a tax expert to analyse the specific facts of your case as also the contents of the agreement in detail before a conclusion is reached on your tax liability.
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