Selling a house is a long and arduous process that can be very troublesome for the owner. Since it is probably the biggest investment that an average person makes in their lifetime, the decision to part with it is a big one. But when it comes to the sale of any property, the government imposes quite a few taxes.
While multiple tax rules can sound menacing, a careful understanding of these can greatly help anyone who’s looking to sell off a home. Planning your sale has the potential to reduce your tax liabilities. Along with this, it is also important to know exactly how much you need to pay so that you aren’t tricked by false agents and rumours into paying more than your share. The following rules must be kept in mind before even considering property sale:
1. Capital Gains Tax Rate:
Short-term capital gains tax: When a house is sold within three years of purchase, it is considered to be a short-term capital gain. In this case, the profits are clubbed in with the general income of the individual and taxed according to his/her tax slab.
Long-term capital gain: When a house is sold after at least three years of purchase, it is considered to be a long-term capital gain. In this case, the profits are charged at 20% after indexation. In the case of long-term capital gain, there are many other tax exemptions one can claim to save on the to, visit this page.
2. Stamp Duty:
This is a tax paid to the government for the creation of any legal document through which a right is created, transferred or recorded. Payment of this amount makes the document legally valid. For sale of property, the amount of stamp duty applicable is 5%. It depends upon the price of the flat (value in the agreement) or the ready reckoner rate (whichever is higher). Therefore, if the price in the agreement is lower than the market price for the property, the stamp duty is charged on the fair market price. To calculate your stamp duty easily, you can use Questate’s easy stamp calculator.
3. Registration Fee:
This is a fee that is levied on the sale of property over and above the stamp duty. The amount varies from state to state. For example- In Maharashtra, the government depends on the booming real estate market for its revenue. The amount of registration fee charged on any sale of the property has been set at ₹30,000 or 1% of property sale amount, whichever is lower.
Along with these taxes, 12% GST is charged on any property under construction, which hasn’t yet received an occupation certificate.
The real estate market is very tumultuous in India and it is very important to stay on your toes. Staying informed about these rules and tax liabilities will help you make the right decision for your financial state and aspirations. However, with daily lives and work, it can be hard to keep track of all these rules. This is why Questate brings to you the best real estate discussion forum in India. Before you engage in any real estate transaction or even if you’re just considering one, get all your real estate questions resolved on our forum. Our team of professional experts will get you all the real estate legal advice you need. Visit Questate whenever you are troubled by real estate!