Recent Belleza Blue case in Pune (2nd Campa Cola like case in Maharashtra) where high court has asked the residents to vacate the illegally constructed 3 floors of the building, is quite a shock to all the flat buyers.
I am working with one of the very few trust worthy real estate companies in India from past 6 years and thus thought of coming up with this guide for buyers of residential apartments.
I hope to cover all the necessary points / information so that technical or legal terms used in the real estate filed do not sound Greek to a lay flat buyer and he is not lost while speaking with the builder. **While doing so I have tried to furnish as accurate information as possible to best of my knowledge but e & oe (errors & omissions expected).
Index
| |
Chapter
|
Synopsis
|
Carpet, Built-up, Saleable etc areas & more
| |
Sq. ft., Sq. Mtrs., Guntha, Acres, hectares etc & more
| |
Title & Search Report, NA, 7/12, PR, Blue Print, CC, Index – II, OC, POA etc
| |
Tiles, Doors, Windows, Painting etc
| |
5. Home Loan
|
Eligibility, EMI, Tenure, Loan Transfer etc
|
Stamp Duty & registration, TDS, ST, VAT etc
| |
RERA, Flat Inspection, Project Reviews etc
| |
Chapter 6: Government Duties &
Taxes
1. Stamp Duty & Registration:
a. Right now, in Maharashtra stamp
duty is 6% of your total flat cost (generally excluding club house
society formation, advance maintenance charges) or ready reckoner value,
whichever is higher.
b. Ready reckoner rate as decided by the revenue department
of a city is the average rate prevalent in the particular area. This is
the minimum rate at which a government should earn the stamp duty. Even if you
have bought a flat at cost less than that of the ready reckoner cost; you will
still have to bear the stamp duty on the ready reckoner cost.
This is
to curb the losses of the government due to rampant cash transactions in real
estate which tend to reduce on paper cost of the property and thus in turn revenues
from the stamp duty.
You may
please check the ready reckoner rate (per sq. mtrs.) in Pune at Pune Ready Reckoner.
c. Whereas registration is 1% of
your total flat cost (as above) or Rs. 30 Thousand whichever is less.
i.e. if
your total flat cost is Rs. 29 Lakhs then registration charges would be Rs. 29
Thousand. And if it’s 31 Lakhs and more it will be Rs. 30 Thousand.
d. You may pay stamp duty and
registration charges by cash / cheque / DD or RTGS depending upon the builder
or your lawyer.
2. Other government taxes:
a. TDS: Tax Deductible at Source.
i.
This
is the biggest headache a flat owner has these days.
ii.
As
per the law, it is a responsibility of a buyer of an immovable property
(flat / land / bungalow etc) of a value exceeding Rs. 50 Lakhs to deduct &
pay 1% of the amount paid that has to be to the builder as an advance tax to
the Income Tax department before 7th of a next month in which he has
paid to the builder.
i.e. if
you have to pay Rs. 100 to a builder say on 21st of July then pay only
Rs. 99/- to the builder and remaining Rs. 1 to the IT department before 7th
of August.
iii.
Thus
TDS is in no way an extra financial burden on buyer but a mechanism to curb the
tax invasion from builders.
iv.
A
buyer has to fill up form no. 26QB online at Form 26QB.
At the
end of this form, there is a link to pay the TDS online or you may opt
for the payment across the bank counter.
Be quick
and accurate while filling this form and save your data whenever an information
pops up saying that session is expiring.
v.
4
-5 days after you have paid the TDS, create a long-in on traces website
of IT department Traces Login & Form 16B.
vi.
By
this time, form 16B is generated in the system which has to be downloaded,
printed, signed and should be submitted to the builder.
vii.
This
form 16B acts as balance 1% of your cost.
viii.
If
you are paying the entire cost in phases as per the construction stage then
will you have to repeat this entire exercise (except log in creation) with
every payment made to the builder.
Thus
making ‘TDS’ tedious.
ix.
TDS
being entirely a buyer’s responsibility, an insensitive builder might not even
inform you about this and soon enough you will get a notice from IT department.
They
charge Rs. 200 fine for a day’s delay in payment, which amounts to a
huge sum if you don’t pay or get this notice for year or so.
x.
Also,
please make sure that you submit all the form 16B’s to the builder. In absence
of which, builder will demand 100% money from you and you will end up paying
additional TDS and or penalty for the same.
xi.
TDS is not applicable if you are buying a flat from an individual owner (resale)
b. ST: Service Tax
–
i.
Since
2012, ST is applicable on flat purchased from a builder in an under
construction project.
ii.
Please
see below the ST rates applicable as on July 2016
Component
|
ST
|
Swachh Bharat Cess
|
Krishi Kalyan Cess
|
Total
|
Agreement Value (Cost mentioned in your agreement)
|
3.5% of the agreement value
|
0.5% of the agreement value
|
0.5% of the agreement value
|
4.5% of the agreement value
|
Other charges (Club house, society formation etc)
|
14% of the other charges
|
0.5% of the other charges
|
0.5% of the other charges
|
15% of the other charges
|
iii.
There
is no uniform opinion of tax consultants on high court ruling on whether
service tax has to be charged on Advance Maintenance payment made to the
builder or not. So few builders will charge you service tax on maintenance while
majority of them won’t.
iv.
A
recent High court ruling says that buying and selling of flats (immovable
property in general) is not a service and thus ST cannot be charged on such
transaction.
v.
It
also states that ST department has to return all the tax collected so far with
an interest of 6%/annum.
vi.
But
sure there will be appeals and re-appeals from government in the Supreme Court
to change this ruling and if needed constitutional amendment as well.
vii.
So
in my opinion, ST is here to stay.
viii.
ST
has to be paid every time and in proportion to the payment made to the builder at
each stage of construction.
ix.
ST has been exempted
if you are buying a resale property or a property for which occupancy
certificate has been received by the builder (ready possession property).
This
also means that you will have to pay the service tax for a ready possession
property for which builder is not in possession of the occupancy certificate.
x.
Also,
even if you are buying a ready possession property from a builder, ST will
be applicable on other charges excluding agreement value.
Thus in
short, ST is applicable on other charges but not on agreement value for a ready
possession property bought from a builder.
c.
VAT: Value Added Tax
i.
This
is the simplest of all taxes.
ii.
It’s
1% of the entire flat cost (excluding advance maintenance).
iii.
Like
ST, VAT is not applicable on ready possession or resale properties.
iv.
VAT
has to be paid immediately after you have registered the agreement.
d. Thus on broad terms, a buyer ends up
paying (6% stamp duty + 1% registration + 1% VAT + 4.5% ST =) 12.5% extra than the
actual flat cost.
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