Taxation of Joint Development Agreements (JDAs) in the Context of the New Income Tax Act, 2025:

 

Introduction:

This note outlines the current and prospective tax framework for Joint Development Agreements (JDAs), confirming the continuity of established provisions following the enactment of the new Income Tax Act, 2025.

The core mechanism for taxing capital gains arising from JDAs for individuals and Hindu Undivided Families (HUFs) has been smoothly transitioned into the new legal framework:

1.  The specific beneficial treatment remains strictly applicable to individuals and Hindu Undivided Families (HUFs) who transfer land via a registered JDA.

2.  The primary benefit is the deferral of the capital gains tax liability. Under the new law (Section 67(14), formerly Section 45(5A) of the 1961 Act), the capital gains are charged to tax in the “Tax Year” (formerly “Assessment Year”) in which the Certificate of Completion (CC) is issued by the competent authority for the project (whole or part).

3.  The Full Value of Consideration (FVC) used to compute the capital gains is explicitly defined. It is the aggregate of:

The Stamp Duty Value (SDV) of the landowner’s share in the developed property as on the date of the issuance of the Completion Certificate; and

Any monetary consideration (cash, cheque, etc.) received as part of the agreement.

TDS Obligations:

1.  The developer’s obligation to deduct Tax Deducted at Source (TDS) also continues under the consolidated TDS provisions in the new Act (Clause 393(1), formerly Section 194-IC).

2.  The developer must deduct TDS at a flat rate of 10% on the monetary component paid to the resident individual/HUF landowner.