Applicable Taxes and Duties while Buying a Property


Taxes and Duties that you pay while buying a property constitute a huge part of the total property buying cost. So, it is necessary that you understand the type of tax for buying a house. Remember, during the transaction of the property there are some taxes which are borne by your seller or dealer. However, the final burden always rests on the shoulders of the buyer because the sellers factor the tax implications into the price list.

Being a buyer, you need to understand that there are multiple taxes that you need to pay to the government in different instances. But, after the advent of a unified tax system called GST or Goods & Services Tax, all taxes that are applicable earlier like service tax and value-added tax have been subsumed under this unified taxation system. This has made it easier for the buyers to pay one single tax rather than the multiple government duties and taxes on the property.

The total cost of the property is usually categorized into two components. First is paid to the seller or builder and second is the legal and statutory costs that are paid to the government. The cost paid to the seller or builder is usually 80-85 percent of the total cost, while the remaining 15-20 percent goes as the tax to the government. You need to know the fact that both ready-to-move and under-construction has different taxes to be paid before the deadline, to know more about the tax deadline in Australia, click here. The legal and statutory costs for the under-construction property is between 15% and 20% and this varies depending upon the state and it also broadly includes the registration, stamp duty, and GST.

Goods and Services Tax (GST) for Under-Construction Properties

The central government has implemented the new unified taxation regime and under this regime, all under-construction properties will be taxed at 18%. So, the Taxes on Flat Purchase and under-construction flat would be different. The government has also implemented a new provision under which buyers can enjoy a deduction of land value equal to 1/3 of the total amount of the property which is being charged by the builder or seller. This reduces the overall GST tax rate from 18% to 12%. So, the total amount of GST tax buyers need to pay for the under-construction property is now 12%.

Recently, the government has again revisited the taxation slab of the real estate and reduced the GST tax to 5% for all the under-construction apartments, flats, and properties. If you buy homes under the affordable housing scheme you are likely to get a huge rebate as the GST tax for the under-construction affordable houses in India is 1% of the total cost.

But, you are required to know that the remaining taxes like stamp duty and registration charges would remain the same. So, buyers are required to pay those taxes and duties apart from GST, even if they are buying under-construction properties. The registration charges and stamp duty would vary depending upon the state where you are buying the property.

Ready to Move Property Taxes and Duties

It is important to note that all ready to move properties across the nation is outside the range of GST Taxes. These properties would be taxed by the government as stated earlier. Below are some of the other duties and taxes for buying a house in India.

  • Registration Charge – This process includes recording the sale documents with the registering officer. You need to register the documents related to the sale, transfer, lease of the property under section 17 of the Indian Registration Act, 1908. The document would be the final agreement duly signed by two parties and subsequently, the buyer would become the rightful owner of the property. There is a registration fee which is 1% of the agreement value and it usually varies from state to state and it is decided by the state government.
  • Stamp Duty – Stamp duty means the sales/income tax collected by the government and it is usually 5% of the total market value of the property. But again it varies depending upon the state where you are purchasing the property. This stamp duty is required to be paid at a specific collection centre or bank prior to registration and delay can lead to a penalty which is calculated based on Ready Reckoner rates issues by the government and until it is paid in full buyers can’t receive the legal status.
  • TDS or Tax Deduction at Source – This is the new type of tax which is implemented under the new section 194(A) included in the Income Tax Act, 1961 by Finance Act, 2013. This tax deducts a small amount during the sale transaction. Under this tax act, the buyers who are purchasing the property need to pay the TDS to the seller by the way of consideration for the transfer of immovable property and this excludes the agricultural land. TDS needs to be submitted in the name of the builder or seller of property. The TDS is deducted at 1%.

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