Real estate developer's guide

Real Estate Developer's and Encyclopedia

Trainings by Vidya Bhagwat

Accounting Aspects of Construction Business

If only life were like Monopoly, where real estate transactions

form with a roll of the dice or the flick of a playing card.

Unfortunately, in real life accounting for real estate is a bit

more complicated than just adding it to the community chest.

Properly recognizing and reporting of transactions is a must.


Service Tax on Construction Contractor : Before dealing with the issue of Service Tax on Construction

Activities under Taxation of Services by Negative List approach

which has come into effect with effect from 01-07-2012, it is

worthwhile to specify here that Service Tax was leviable on

construction activities under the following three categories of

services until 30-06-2012:

a) Commercial or Industrial Construction Services with effect from 10-09-2004


b) Construction of Complex Services with effect from 16-06-2005

c) Works Contract Services with effect from 01-06-2007. However, with effect from 01-07-2012 all activities related to

construction fall within the purview of following “Declared Services” under Section 66E of the Act:

(b) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-certificate by the competent authority.


Other Issues Relating to Construction Business :

There are four important issues relating to construction business.

They are :• Issues with respect to partnership.

• Whether construction activity amounts to manufacture.

• Redevelopment of old societies.

• Applicability of Section 50C


Construction Contractor’s Agreement :

• THIS AGREEMENT made at ……………. on this ……………… day of ………. 2000, between A S/o B resident of ……………………….. (hereinafter referred to as “the Employer”, which expression shall unless repugnant to the context or meaning thereof, be deemed to include his heirs, legal representatives, executors and administrators) of the ONE PART and XYZ Co. Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at ……………………………….. (hereinafter referred to as “the Contractors” which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the OTHER PART.


Types Of Land :


• Forest Lands: India was covered with dense forests in primitive ages.

More and more lands were needed for agriculture, settlement industry, roads etc. with the growth of population. So man utilized land by cutting down and cleaning the forests in order to fulfill his growing needs. Now only about 22% of the total land area of our country is covered with forests.

• Land for Agriculture or Farm Lands: India is primarily an agricultural country. About 55% of

the total land areas are used for growing food-crops, vegetables, cash crops and fruit. Food-crops are grown on about 45% of land out of the total 55% under cultivation. Vegetables and fruit are grown on the rest of the lands and some lands are left without any cultivation occasionally.


• Agricultural land : Indian people are mainly employed in agricultural

activities thus agricultural land is almost 54.7% of the total landmass. The agricultural lands are located on the outskirts of the Metro cities. Usually the agricultural land shares space with the industrial areas outside the city. There are agricultural lands in almost all the states of India.

• Barren Land : Within the landmass of India, mainly the land areas of

Rajasthan, parts of Jammu, Leh, and parts where snowfall prevent any cultivation are barren.


• Real estate lands :

Real estate lands are growing at a tremendous rate in

India. All metro cities have huge boom of real estate properties,

due to the growth of economy, new industries, information

technology and business outsourcing. With the people becoming

mobile due to transferable jobs, the growth of houses and

apartments have increased manifold all over India.


Agricultural Land - its Uses and Conversion :

Factors that Determine Approval for Change of Land Use :

Generally, there are certain factors that the Government considers while approving the change of land use. They are:

1. Public interest 2. Use of land 3. Acquisition hierarchy 4. Compensation


Land Conversion Table :


What is Transferable Development Right?

transferable development rights (TDR) :

A zoning and land planning tool often used to preserve undeveloped or culturally significant areas. Typically, the local government will identify an area it wants to retain in a natural state, such as farmland, called the sending area. Government will also identify an area in need of development, usually through rehabilitation, called the receiving area. To meet those two goals—preservation one place, development in another—government will buy development rights from the farmers, for example. The farmers will agree to restrict their land so it cannot be developed. In return, they will receive something in the nature of credits that allow zoning variances in the receiving along each step of the way.


Service Tax: Basic Concepts and Routine Procedure :

• Introduction to service tax: Like the tax on sale of goods, service tax is a tax on the

sale of services. It is an indirect tax collected by the service provider on behalf of the government. Though service tax is a type of sales tax on services rendered, it is administered by the Department of Excise and Customs working under Department of Revenue, Ministry of Finance, Government of India. The responsibility of administration and collection of service tax has been vested with CBEC (Central Board of Excise and Customs)


Accounting: Basic Concepts :

• Some of the basic accounting terms that you will learn include revenues, expenses, assets, liabilities, income statement, balance sheet, and statement of cash flows. You will become familiar with accounting debits and credits as we show you how to record transactions. You will also see why two basic accounting principles, the revenue recognition principle and the matching principle, assure that a company's income statement reports a company's profitability.

Bookkeeping and Accounting Share Two Basic Goals :

• To help the owner keep track of your income and expenses. • To make financial reports for understanding the results of operations.


Capital Gains Tax - An Overview :


• To save long term capital gain the seller has to buy a house property within two years of sale of capital asset or construct a house within three years. If seller is not able to identify a property he/she can open a capital gain accounting scheme’s special account and park the money until he finds the property (with limit of 3 years). Seller also can invest money in specific bond up to limit of Rs 50 Lakhs to save LTCG tax.


Thank You

Real estate developer's guide

Education

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