MC EXCLUSIVE Capital gains from JDAs under lens, CBDT directs directorates to flag missing disclosures

Kolkata’s model involves cross-referencing with returns filed and issuing summons if capital gains omitted.

The Central Board of Direct Taxes (CBDT) has introduced a new standard operating procedure (SOP) to strengthen monitoring of capital gains from joint development agreements (JDAs), in a bid to plug revenue leakages in real estate transactions, sources said.

The SOP, issued through an office memorandum dated September 15, adopts a data-driven model piloted successfully by the Kolkata investigation unit. It directs officials to use Real Estate Regulatory Authority (RERA) and Housing Industry Regulation Act (HIRA) websites to identify projects, cross-check ownership details with income tax filings, and issue summons where capital gains disclosures are missing. All directorates have been asked to submit compliance reports by October 31, 2025.

Why was revenue leaking?

Under the earlier framework, many landowners entering JDAs either failed to disclose capital gains in their tax returns or disclosed them in incorrect years. Since capital gains were taxable at the time of signing the JDA (even before receiving developed property or money), several taxpayers avoided reporting the liability altogether, creating gaps in collection. The absence of a structured mechanism meant the tax department often relied on chance information or third-party inputs to detect such cases.

To ease this hardship, the Finance Act, 2017 deferred the timing of taxation. Instead of paying capital gains tax when the JDA was signed, landowners would now be taxed only in the year when the competent authority issued a completion certificate for the project. This gave taxpayers relief, as the tax liability coincided with the time when they actually received possession of property or consideration. However, even after this change, many landowners either did not disclose capital gains or reported them inaccurately. The problem was that tax authorities had no direct access to data on JDA projects from state real estate regulators like RERA, making it difficult to systematically match projects with tax returns. As a result, several transactions slipped through without scrutiny, leading to leakage of revenue.

How the new SOP plugs gaps

The new framework mandates officials to track JDA-linked projects through RERA and HIRA portals, match them with tax return filings and verify whether capital gains are properly disclosed. If discrepancies are found, summons can be issued to taxpayers to seek explanations and supporting evidence.

“The above method allowed the investigation directorate to proactively identify cases of non-compliance rather than relying on chance or third-party information,” the CBDT said in the memorandum.

In cases where RERA websites do not carry sufficient details, directorates have been advised to obtain JDA-related data directly from state regulators or development authorities.

The new system “establishes a clear, systematic, and data-driven framework to ensure that eligible cases are assessed and tax revenue is secured efficiently and fairly nationwide, while following a non-intrusive and transparent manner,” it stated.

Expert view

Tax experts said the move would significantly improve compliance. “The CBDT’s latest office memorandum on Joint Development Agreements (JDAs) will bring efficiency in capital gains assessment. The data-driven mechanism to track JDAs through RERA and cross-reference them with tax filings will ensure proactive detection of undisclosed capital gains, and reduce the dependency on chance or third-party information,” Rajat Mohan, Senior Partner, AMRG & Associates, told Moneycontrol.

“For developers and landowners, it sends a clear message – compliance must be factored in from the time of entering into JDAs, as information flow from RERA to the tax department is now seamless. Going forward, this SOP is likely to tighten monitoring of real estate transactions,” Mohan added.

What is a Joint Development Agreement (JDA)?

A JDA is a contract between a landowner and a property developer. The landowner contributes land, while the developer constructs residential or commercial units. The landowner typically receives a share of the developed property or part of the revenue, while the developer retains the rest.

Why was revenue leakage happening?

Tax on JDAs was triggered at the time of signing the agreement, leading many landowners to avoid disclosure since they had not received cash or property yet. Even after deferred taxation to the year of project completion, weak data-sharing meant some taxpayers continued to under-report gains.