The CBDT implements a standard operating process to oversee real estate transactions more closely. By October 31, all of CBDT’s investigative directorates are required to implement the model and provide compliance reports.
In an effort to stop income leaks in real estate transactions, the Central Board of Direct Taxes (CBDT) has implemented a new standard operating procedure (SOP) to improve oversight of capital gains from joint development agreements (JDAs), according to sources.
The SOP, published in an office letter on September 15, uses a data-driven approach that the Kolkata investigative unit has successfully tested. It instructs authorities to locate projects, verify ownership information with income tax returns, and issue summonses in cases where capital gains declarations are absent by utilizing the websites of the Real Estate Regulatory Authority (RERA) and the Housing Industry Regulation Act (HIRA). By October 31, 2025, compliance reports are due from all directorates.
What was causing the income to leak?
Many landowners who joined JDAs under the previous regime either did not report capital gains on their tax returns or did so in the wrong years. There were gaps in collection because some taxpayers chose not to declare the obligation at all since capital gains were taxable at the moment of signing the JDA (even before receiving developed property or money). Due to the lack of a systematic system, the tax department often depended on haphazard information or input from outside parties to identify such situations.
The Finance Act of 2017 postponed the taxes date in order to alleviate this suffering. Landowners would now only be subject to capital gains tax in the year that the project’s completion certificate was granted by the appropriate body, rather than when the JDA was signed.
Because the tax obligation and the actual receipt of the property or compensation fell on the same day, this provided relief to the taxpayers. Even with this modification, however, a large number of landowners either failed to record capital gains or did so in an incorrect manner. It was challenging to correlate projects with tax returns in a systematic manner because tax authorities lacked direct access to data on JDA projects from state real estate regulators such as RERA. Consequently, a number of transactions were unnoticed, causing income to leak.
How the updated SOP closes gaps
According to the new framework, authorities must monitor JDA-related projects via the RERA and HIRA websites, compare them to tax return files, and confirm that capital gains are appropriately reported. Taxpayers may be summoned to provide explanations and supporting documentation if disparities are discovered.
The CBDT said in the memorandum that “by using the aforementioned approach, the investigative directorate was able to proactively identify examples of non-compliance instead of depending on chance or third-party information.”
Directorates have been instructed to get JDA-related information directly from state regulators or development authorities in situations where RERA websites lack enough information.
In a non-intrusive and open way, the new approach “establishes a clear, methodical, and data-driven framework to guarantee that qualified cases are evaluated and tax income is collected effectively and equitably worldwide,” according to the statement.
Expert opinion
According to tax experts, the action would greatly increase compliance. Capital gains evaluation will become more efficient according to the CBDT’s most recent office memorandum on Joint Development Agreements (JDAs).
According to Rajat Mohan, Senior Partner at AMRG & Associates, “the data-driven approach to monitor JDAs via RERA and cross-reference them with tax filings would assure proactive identification of unreported capital gains and eliminate the need on chance or third-party information,” Moneycontrol said.
Since the information flow from RERA to the tax department is now smooth, it sends a clear message to developers and landowners that compliance needs to be considered from the moment they enter into JDAs. This SOP is probably going to make real estate transaction monitoring more stringent in the future,” Mohan said.
A Joint Development Agreement (JDA): What is it?
A JDA is an agreement between a property developer and a landowner. While the developer builds residential or commercial units, the landowner gives land. Usually, the developer keeps the majority of the money and the landowner gets a portion of the developed property or the earnings.
Why was there revenue leakage?
Due to the fact that JDA taxes were due at the time of agreement signing, many landowners chose not to disclose because they had not yet received money or property. Due to inadequate data exchange, some taxpayers continued to underreport profits even after deferring taxes until the year of project completion.