Tax in Real Estate

Tax in Real Estate

Taxation relating to Real Estate-

Major taxes related to Real Estate in India are Stamp Duty, Registration and the newly implemented GST (Goods and Services Tax) which integrated all indirect taxes like Service tax, VAT etc. under itself. 

Ready-to-move properties

 Ready-to-move properties have no alterations in their taxation as GST is beyond their scope. Some basic taxes involved in Ready-to-move properties are- 

Tax Deduction at Source (TDS):

TDS was in included in the Income Tax Act, 1961 by the Finance Act, 2013. TDS deducts a percentage of amount during a sale transaction by an individual. TDS needs to paid by the buyer of the immovable property in the name of the seller. TDS includes all the residential society charges such as club membership fees, maintenance fees, car parking fees, electricity or water facility charges or any other charges of similar nature. Since 2019, TDS levied is at one per cent of the property transaction value for any property above 50 lacs. However, agricultural plots and lands are not in the ambit of TDS.

Stamp Duty Charges-

  • The recent stamp duty charges that are levied by the government of India are 5 percent of the property agreement or market value (Ready Reckoner value) whichever is higher. Some state may have a different stamp duty.
  • Stamp duty payments are made before the registration of the property without which registration of any property cannot take place.
  • Stamp duty payments can be done at designated bank or collection center or even Online to the stamp duty departments od states.
  • Stamp duty charges are applicable at every transfer of property from one individual to another.
  • In special cases of transfer of property, a revised stamp duty is applicable like in case of gift deeds and wills.

Registration charge

  • The registration process is a very crucial step in home buying. A duly registered document is the valid proof in the frame of law to prove that you have the legal right on the property.
  • Indian Registration Act makes registration of documents relating to the transfer, sale or lease of a property mandatory.
  • The registration process involves making the Sale Deed recorded in the government records by a registering officer.
  • Registration document protects the buyer in case of unlawful and fraudulent transactions.
  • Once the final agreement signed by both the parties is registered the buyer becomes the rightful owner of the mentioned property.
  • Registration charge is usually one per cent of the ‘agreement value’ but it can vary from state to state. 
  • In Maharashtra, the registration charges are Rs 30000 or one per cent of property value whichever is less.
  • Special provisions are there in cases of wills where the registration charges are very low. In Maharashtra, a nominal charge of Rs 100 is levied. 

Under-construction properties

All the taxes of Ready-to-move properties like TDS, stamp duty and registration is applicable to under construction properties. However, in under construction an additional tax is applicable which is the Goods and Services Tax (GST).

Goods and Services Tax (GST) –

Real Estate (Regulation and Development) Act (RERA) brought major reforms tax reforms in Indian real estate sector when they introduced Goods and Services Tax (GST) in Indian Real Estate. 

Initially the GST that was Levied by the RERA Act was 18 percent with allowance of certain deduction where the net effective GST would come to 12 percent of the agreement value. However, soon the government reduced it to five per cent in the under-construction properties and one per cent for the affordable homes sector. 

GST was a replacement for all indirect taxes applicable including VAT, Service Tax, octroi and all indirect taxes by a single unified tax. However, the stamp duty and registration charges remain unaffected and are levied as per state regulations. 

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