The Union Budget 2017 was a surprise for all Indians. It has provided a drive to real estate sector by promising to continue economic reforms and prudent fiscal management.
Mr Arun Jaitley, Finance Minister, in his Budget 2017-18 speech has given a push to Indian real estate sector. It was announced in the budget that the a�?Affordable Housinga�� will be given a�?Infrastructurea�� status.
Do you know what would be the result of this?
It would result in increased participation from private players. Union budget has laid an impact on the market in a huge way and many important financial exercises has been set for an entire year for Indiaa��s economy.
The real estate industry is one of the most heavily taxed industries in the country. Leta��s see what are the various taxes applicable to residential real estate industry.
On purchasing a property that is under construction, you will be charged service tax and deposit it with the central government.
VAT (Value Added Tax)
If you are purchasing an under-construction property, you will have to pay additional VAT and this value added tax is deposited with state government. Developers will have to maintain proper accounts of goods purchased for construction and VAT paid by them.
So, both these taxes cannot be charged for properties that are purchased after obtaining the certification. Similarly, there is no service tax or VAT for completed properties that are purchased for resale.
The state government charges stamp duty at varying rates, for registration of sale agreement for real estate transactions.
Applicability of service tax and VAT
An under-construction property can be divided into three parts:
Who is liable to pay these taxes?
Builders often recover the cost of taxes from buyers but sometimes it also depends on the agreement between builder and buyer. According to the agreement, it can be decided who will pay the amount, buyer or builder.
After demonization, there is a momentum seen in the market and maybe more affordable launches would happen. It is giving people more investment choices, especially in the Delhi-NCR areas. All projects under construction will be impacted upon by infrastructure status.
When you happen to stay in a house for two of the previous five years, you owe little or no taxes on its sale. It is important to have a knowledge of tax laws as it will make a big difference when you sell a property, residential property or previous residential property.
The cost of under construction residential unit is about to increase and this will blow to the industry. There is an urgent need for industry bodies to connect with the government to minimize this impact by clarifying position composition scheme and already paid service tax and VAT by developers on under construction property.