Various taxes which are applicable on purchase of immovable property
If you want to read more about the taxes just click on below topic.
STAMP DUTY (with effect from 01st April, 2013)
Stamp Duty is charged on Market Value or on the Agreement Value which ever is higher.
Stamp Duty in Maharashtra differs according to the jurisdiction in which it falls.
1. In Nagar Panchayat stamp duty is 3% on Market Value or on the Agreement Value which ever is higher. (For Rural Area or Other Area)
2. In Municipal Council stamp duty is 4% on Market Value or on the Agreement Value which ever is higher. (Area Under MMRDA, Municipal Corporation and Adjoining Cantonment and Influence Zone).
3. In Municipal Corporation stamp duty is 5% on Market Value or on the Agreement Value which ever is higher. (Municipal Corporation and Adjoining Cantonment Area).
REGISTRATION FEE (with effect from 01st March, 2009)
On 16/02/2009 Registration Department removed the Registration fee limit of
30000/- and introduce direct 1% without upper limit, but the department issused new notification dated 01/09/2009 was stayed for the temporarily till further order.
Registration fee is 1% (one percent) on Market Value or on the Agreement Value or 30000/- which ever less.
LOCAL BODY TAX (LBT) (w.e.f. 1st April, 2013)
The Maharashtra Government had made provision in the Maharashtra Municipal Corporations (MMC) Act. The Urban Development Department issued a notification on 13th, March, 2013 directing the department of registration and stamps to recover 1% (LBT) Local Body Tax additional to stamp duty to the civic bodies of Nagpur, Pune, Thane, Pimpri Chinchwad and Navi Mumbai on such documents like Sale Deed, Mortgage Deed etc.
1) Maharashtra Municipal Corporation Act, (In other Municipal Corporation Limits (LBT) Local Body Tax) Mumbai City and Mumbai Suburban District are excluded.
2)Municipality / Municipal Council / Nagar Panchayat Limits
3)Zilla Prishad Limits
4)Nagpur Improvement Trust Limits
Stamp Duty + 1% (LBT) on Market Value or on the Agreement Value for Sale Deed / Agreement for Sale which ever is higher and on Gift Deed 1% on Market Value.
Circular for Local Body Tax (L.B.T.) in Maharashtra Click for Download
TAX DEDUCTED AT SOURCE (T.D.S) (w.e.f. 1st June, 2013)
Tax Deducted at Source (TDS) it charged on part of total value not cost.
Value of immovable property is above 50 Lac the seller has to pay TDS on it (Seller having Income Tax Pan Card) is 1% (one percentage).
If property is sold-out by the vendor/seller to vendee/purchaser and if seller doesn't have PAN Card, or if vendor/seller doesn't provide it’s Permanent Account Number (PAN) then the vendee/purchaser has a right to deduct TDS @ 20% under section 206AA of the Income-Tax Act, 1961 of the consideration amount or market value amount which ever is higher and issues TDS Certificate and pay a similar to Income Tax Department.
TDS deducted by the Vendee / Purchaser / Buyer at the time of making the payment to Vendor / Seller.
Vendee / Purchaser / Buyer have to deposit the deducted amount within 7 days from the end of the month in which period deduction has been made.
All the details regarding to the transaction and TDS on the property are required to be furnished in FORM 26QB and it has to be submitted through online payment made at the time of payment.
After depositing of TDS the Vendee / Purchaser / Buyer also required to issues FORM 16B to the Vendor / Seller of the property in respect of TDS deducted and deposited within the Government Treasury
In case of failure to go with the provisions, interest and penalty would be obligatory to the Vendee / Purchaser.
Interest are charged @ 1 % per month or a part of the month for failure to deduct tax or short deduction of tax from the date the tax was deductible until the date an equivalent is subtracted.
Interest is charged @ 1.5 % per month or a part of the month for tax subtracted however not paid to the government from the date of deduction until the date of actual payment.
TDS is applicable for the whole installment, from the start of Earnest amount until the possession of the property.
Non Resident Indians (NRIs)
Income Tax Department had made Provisions for Non Resident Indian that, if the payment is formed to a Non-Resident Indian then section 194-IA won't be applicable rather section 195 is going to be attracted and TDS is needed to be subtracted @ 20% + EC (Education Cess) & SHEC (Secondary and Higher Secondary Education Cess) on the sale thought, surcharge @ 10% are going to be applicable if the amount paid exceeds 1 Core. The limit of 50,00,000/- isn't applicable just in case of payments created to NRI’s.
Note : We advise our users to take proper legal helps from Chartered Accountant.
In case of any further queries or concerns you can contact Link : TIN Call Center at 020-27218080 or email to email@example.com or to visit the TIN (Tax Information Network of Income Tax Department) website https://www.tin-nsdl.com/
MAHARASHTRA VALUE ADDED TAX (M.V.A.T.) (w.e.f. 1st April, 2010)
Maharashtra Value Added Tax (MVAT) is 1 % and which is applicable for the property which are under construction stage.
VAT can not be applicable to the property which has been fully developed (Ready to Possession) fully constructed.
SERVICE TAX (S.T.) (w.e.f. 1st June 2016)
The Service tax is applicable when purchaser purchases immovable property which is in process (under construction) and it’s charged on the construction cost only.
* Earlier service tax was 14% (Abatement allowed is 75%) so taxable is 25%
** Swachh Bharat Cess 0.5% on all taxable services w.e.f 15/11/2015
** Now service tax is 14.5% (Abatement allowed is 75%) so taxable is 25%
Service tax is applicable @ 14.5% on 25% of the Total Purchase price in other word Service Tax is @ 3.625% (25% of 14.5%) e.g. (Service Tax 14 percentage x 25%=3.625)
*** Krishi Kalyan Cess 0.5% on all taxable services w.e.f 01/06/2016
*** Now service tax is 15% (Abatement allowed is 75%) so taxable is 25%
Service tax is applicable @ 15% on 25% of the Total Purchase price in other word Service Tax is @ 3.75% (25% of 15%) e.g. (Service Tax 15 percentage x 25%=3.75)
Example : If the cost of Residential Unit 50 Lac
Abatement allowed 75% : 5000000 - 75%=1250000 (Value after abatement)
Value after Abatement: 1250000 x 14.5%=187500 (Service Tax payable)
* If Area of property in size (measurement) 185.88 sq m. carpet (2000 sq ft carpet) (service tax is 15% (Abatement allowed is 70%) so taxable is 30%
If the flat area is above 185.88 sq m. carpet (2000 sq ft carpet) or value of 1 Core and above Service Tax is @ 4.5% (30% of 15%) e.g. (Service Tax 14 percentage x 30%=4.5)
Example 1 : If the cost of Residential Unit 1 Core or (Area is 2000 sq ft / 185.88 sq m.)
Abatement allowed 70% : 10000000 - 70%=3000000 (Value after abatement)
Value after Abatement: 3000000 x 15%=450000 (Service Tax payable)
Example 2 : If the cost of Residential Unit 50 Lac and Area is 2000 sq ft
Abatement allowed 70% : 5000000 - 70%=1500000 (Value after abatement)
Value after Abatement: 1500000 x 15%=225000 (Service Tax payable)
Collecting of the service tax is the responsibility and liability of the Builder or Real Estate Developer to collect it from the purchaser (s)
Exempted from Service Tax
Construction of Single residential Unit (Bungalow or Row House)
If property is constructed for Low Cost Houses with an area upto 60 sq m. carpet area in Group Housing Projects approved by the competent authority empowered under the scheme of Affordable Housing Projects in partnership framed by the Ministry of Housing and Urban Poverty Alleviation by the Government of India.
‘DONATION’ or ‘TRANSFER CHARGES’ or ‘PREMIUM’
(In Co-operative Housing Society)
According to the OLD MODEL BYE-LAWS, bye law no. 40(d)(vii) the transfer fees chargeable is
50/- and the ‘Donation’ or ‘Transfer Charges’ or ‘Premium’ amount chargeable is a maximum of 1,000/- Commissioner of Co-operation and Registrar Co-operative Societies, Pune, Maharashtra issued Circular dated 27th November, 1989 the maximum premium was increased to 25000.
According to the NEW MODEL BYE-LAWS, Bye-law no. 38(e)(vii) provides for transfer fee of 500/- only, further, Bye-law 38(e)(ix) provides for the payment of ‘Donation’ or ‘Transfer Charges’ or ‘Premium’ at the rate to be fixed by the General Body but within the limits prescribed by the Department of Co-operation, Government of Maharashtra from time to time. Circular dated 9th August 2001 issued by the Co-operation and Textile Department, the maximum amount at 25000/-.
The Commissioner for Co-operation and Registrar Co-operative Society, Pune, Maharashtra, clarify that ‘Donation’ or ‘Transfer Charges’ or ‘Premium’ should be as per the table of maximum allowable transfer fee and clearly states that no further amount can be taken as ‘Donation’ or ‘Transfer Charges’ or ‘Premium’.
Note : When the transfer is among the family members, the Society cannot charge the ‘Donation’ or ‘Transfer Charges’ or ‘Premium’ and will have to transfer the shares without any money consideration.
Maximum premium can be collected from members as below under Area Jurisdiction
1) Municipal Corporation & Development Authorities 25000/-
2) ‘A’ Class Municipalities 20000/-
3) ‘B’ Class Municipalities 15000/-
4) ‘C’ Class Municipalities 10000/-
5) Rural Area 5000/-
PROPERTY TAX (ASSESSMENT BILL)
When purchasing immovable property such as residential unit, commercial unit (office / shop) or industrial unit in under construction building, ready possession building or resale unit in building, one has to know about the property tax is been paid by whom.
Maharashtra government have made obligatory to pay property tax on capital value-based system to calculate capital levy on buildings, lands, homes and institutions across the state; the new system has been introduced w.e.f. 2010 for all the Municipal Corporations, Councils and Local Bodies.
The capital levy is calculated with the assistance of the revenue enhancement (Stamp Duty Ready Reckoner Rates) that area unit revised by the government each year with the new budget.
The capital value-based system is upgraded each 5 years however the tax levied wouldn't be greater than 40 percentages over the previous years.
WHAT IS PROPERTY TAX?
Property tax is kind of tax which is collected by the local government or by the Municipal Corporation in jurisdiction where property is situated.
Property tax is collected in advance for period of Half Yearly or Yearly. The property tax is applicable to Residential, Commercial Industrial buildings in different proportion.
WHERE PROPERTY TAX AMOUNT IS SPENT BY THE LOCAL BODY OR MUNICIPAL CORPORATION ?
Collected property tax is mainly used for the public services like repairing roads, construction schools, buildings, sanitation, walking footpath for public, public toilets, gardens, etc.
TO WHOM THE PROPERTY TAX BILL IS SENT BY THE AUTHORITY ?
The BMC Assessment Department raise single bill of property tax to the respective owner of the building / Land Lord / Co-operative Society or to individual member.
IT IS WHOSE RESPONSIBILITY OF PAYING PROPERTY TAX TO AUTHORITY BY THE OWNER OF BUILDING (LAND LORD / CO-OPERATIVE SOCIETY) ?
Earlier landlords were constructing buildings and letting out premises on tenancy basis, purely in form of income point of view but after 1960 hardly any building is constructed on single ownership basis for tenancy purpose the landlord used to pay property tax.
Property tax is the annual amount paid by a land owner to the local government or the municipal corporation of his area.
After 1960 the properties are developed on multi ownership basis or jointly owned by the members of co-operative housing societies as ultimate beneficiary.
It is the responsibility of the individual member of the society to pay the assessment tax bill to the society if the single bill is sent to society by the authority.
If the society had applied to the authority for sending separate assessment bill to individual member then it’s the responsibility of the member to pay the same directly to authority.
Note : If tax isn't paid to the authority within 3 months fine will be imposed and they can issue warrant of attachment “A-1” the authority is sceptered to connect and auction the immovable properties of the defaulters, for recovery of taxes.
‘INCOME TAX BENEFIT U/s 24, U/s 80EE and u/s 80C
One can claim Tax benefit on the amount paid towards stamp duty and registration fees paid on the property.
One should know about conditions for calming deduction under various section i.e. u/s 24, u/s 80EE and u/s 80C of Income Tax Act.
* If the amount have been paid by the assesses.
* One can claim the deduction only after possession of the property has been taken.
* The house should be in the name of assesses claiming deduction.
* The deduction can be claimed only in the year when payment is completed.
* This deduction is available only for the purchase of new residential house property and not on the commercial property.
* The maximum deduction is available upto the limit of 150000 u/s 80C.
The tax write-off is for the persons and not per the property. If property has been purchased collectively and have taken joint loan on property, every purchaser repaying the amount would be eligible to say whole deduction severally.
Note : We advise our users to take proper legal helps from Chartered Accountant.