Short answer: twelve clauses in a joint development agreement decide the tax, and every one of them is negotiable until the document is signed. This is what each does — to the landowner's capital gains year, to the GST on both legs, and to who has cash at the completion certificate — and the wording that goes wrong.
The framework behind all of it is in how income tax and GST apply to a JDA. This is the checklist for the draft.
1. The parties, and what the landowner is
Individual or HUF, or a company, LLP or firm. The capital gains deferral to the completion certificate under s.67(14) of the 2025 Act — the old s.45(5A) — is available only to an individual or HUF. Where the landowner is anything else, the gain arises on transfer, which is usually the year of signature and possession. If the land is held through an entity, that is the first thing the tax position turns on, and it cannot be fixed by drafting.
2. The description of the consideration
The deferral is written for a specified agreement under which the landowner allows development in consideration of a share, being land or building or both, in such project. Area sharing answers that description. A clause that gives the landowner a share of receipts, or settles the entitlement in cash, may not — and the gain moves to the year of transfer. The choice between the two structures, and what each costs, is worked through in area sharing or revenue sharing.
Read for: whether the words confer units or money, and whether a "revenue sharing" label sits on top of an area entitlement or the reverse.
3. Registration
A specified agreement is a registered agreement. An agreement executed on stamp paper and never registered — or one where only the power of attorney is registered — leaves the landowner with a transfer and without the deferral.
Read for: an express undertaking to register, and a date.
4. Possession
Handing over possession under an agreement can itself be a transfer, independent of when title moves, under s.2(47) read with the part-performance provision of the Transfer of Property Act. For a landowner outside the deferral that clause is frequently the year the gain is taxed. For one inside it, the deferral protects the year — but only while the agreement qualifies.
Read for: the possession date, whether it is licence or possession, and whether it precedes registration.
5. Monetary consideration and TDS
Any cash component — advance, balancing payment, top-up — attracts deduction at source at 10% on the cash, and only the cash; the area share carries no withholding. Both errors are common: deducting on the value of the built-up area, and deducting nothing because the deal is "mostly area". See TDS on JDA consideration.
Read for: every rupee that moves, when, and a clause obliging the developer to deduct, deposit and report against the landowner's PAN.
6. The security deposit
A refundable deposit is not consideration. One that is adjusted against the landowner's share, or forfeited on a stated event, is — and it becomes consideration later than it should have been recognised. The clause should say which it is.
7. The sharing ratio, and the valuation date
The ratio fixes the landowner's share, and the date the development rights are transferred fixes the GST valuation of the construction service back to the landowner — benchmarked to what independent buyers paid for similar apartments nearest that date. A project whose prices rise after signature is valued at the earlier, lower figure. See the landowner's share and the credit nobody claims.
Read for: a defined transfer date, and an agreed basis for "similar apartments".