Do you have a property where you have invested or are you looking to buy a property, you will know that there are tax implications involved in buying a property in India. Nowadays, taxation involved in a property purchase is much simpler than it was before. Buying property is the biggest and most important purchase most people make in their life. The taxes applied are different for under-construction and ready-to-move-in properties. After rolling out of the Goods and Services Tax (GST), taxes previously applicable on real estate purchase have been included under this single unified tax system. Property taxes can be divided into two categories that are sales tax and maintenance tax. The purchaser has to pay most of the sales tax, whereas capital gains tax is paid by the owner of the property. The seller is also responsible for paying the maintenance cost, even if the property is on rent. There are many different sales taxes to keep in mind when you buy or sell a property in India. Here are a few tips to save on taxes when buying a property in India.
Understand taxes difference between under-construction and ready-to-move properties:
Taxes on under-construction properties Statutory and legal expenses for under-construction properties change between 15-20 percent, contingent upon the state being referred to and extensively incorporate stamp obligation, enrollment, and GST. The stamp duty is paid on the deal understanding, to render a property exchange legitimate and it differs from state to state. To enroll a sale agreement with a government-approved registration officer, purchasers need to pay a registration expense of one percent on the complete expense of the property, at the area sub-registrar’s office. Under the new duty system actualized in 2017, under-construction properties are as of now taxed at 12 percent on the base expense of a property. Notwithstanding, the GST Council is reflecting on lessening this rate, with many foreseeing it to be diminished to either eight percent or five percent.
Taxes on ready-to-move-in properties:
Ready-to-move-in properties are exempted from GST only if that particular project is issued a completion certificate. People who are interested in buying such properties need to pay only the stamp duty and registration charges as taxes, which is seven to eight percent of the total property cost. Thus, ready-to-move-in properties offer a good deal for homebuyers, who not only get a chance to see the property they are buying but also have the advantage of moving in immediately and save on rentals.
Tax relief for the affordable housing segment:
To boost sales in the affordable housing segment, the government has urged developers to refrain the homebuyers from charging them with GST, as this effective eight percent GST rate in affordable housing segment against their input credit. In order to get a major push to the affordable housing segment, buyers can avail a lower concessional GST rate of eight percent.
If in case there is an occurrence of a jointly-owned property (particularly, by a couple) one can save money on duties viably. For example, if the spouse isn’t working, the rental salary can be partitioned in the extent of responsibility for the property and along these lines, one can save money on duties. This can likewise be helpful in a situation, wherein, both are working yet are in various tax slabs.