Taxes - Under Construction Flat Purchase
Last Update - 15-April-2019 (After 5% GST from 01-Apr-2019)
Purpose of the article: 90% of new flat buyers opt for bank home loans, either to meet investment deficits or to get tax benefits. In order to avail maximum amount from bank, customers make under-construction flat purchase and followed by work contract agreement.
This article tries to give an overview of different taxes(and its calculation) to be paid while purchasing under-construction flat.
Purpose of the article: 90% of new flat buyers opt for bank home loans, either to meet investment deficits or to get tax benefits. In order to avail maximum amount from bank, customers make under-construction flat purchase and followed by work contract agreement.
This article tries to give an overview of different taxes(and its calculation) to be paid while purchasing under-construction flat.
Assumptions for purpose of calculations:
1. Total flat purchase cost - 38 Lakh
2. Sale deed amount as per registration department - 16 Lakh, Extra works agreement to bank - 22 Lakh
3. Bank loan amount availed - 80% of purchase cost = 30 Lakh
1. Total flat purchase cost - 38 Lakh
2. Sale deed amount as per registration department - 16 Lakh, Extra works agreement to bank - 22 Lakh
3. Bank loan amount availed - 80% of purchase cost = 30 Lakh
Registration Charges - by State Government :
Registration charges in Andhra Pradesh as on 1-June-2016 - 7.5% of sale deed amount
(7.5% = 5% stamp duty + 1.5% transfer duty + 1% registration fees)
Registration charges - 7.5% of 16 Lakh = Rs. 1,20,000/-
* Please note that documentation charges and other formalities are extra to this.
Registration charges in Andhra Pradesh as on 1-June-2016 - 7.5% of sale deed amount
(7.5% = 5% stamp duty + 1.5% transfer duty + 1% registration fees)
Registration charges - 7.5% of 16 Lakh = Rs. 1,20,000/-
* Please note that documentation charges and other formalities are extra to this.
GST - by Central Government :
From July-2017 onwards, GST is introduced and applicable on under-construction flat purchases.
GST Charges - 12% of sale deed amount = 12% of 16 Lakh = Rs. 1,92,000/-
Gross Total of Taxes on 16 Lakh property purchase = 1,20,000/- + 1,92,000/- = Rs. 3,12,000/-
Before GST implementation,
VAT (1.25%) + Service Tax(3.75%) = Total 5% used to be charged.
VAT & Service Tax on 16 Lakh = 5% of 16 Lakh = 80,000/-
Gross Total Taxes before GST = 1,20,000/- + 80,000/- = Rs. 2,00,000/-
From July-2017 onwards, GST is introduced and applicable on under-construction flat purchases.
GST Charges - 12% of sale deed amount = 12% of 16 Lakh = Rs. 1,92,000/-
Gross Total of Taxes on 16 Lakh property purchase = 1,20,000/- + 1,92,000/- = Rs. 3,12,000/-
Before GST implementation,
VAT (1.25%) + Service Tax(3.75%) = Total 5% used to be charged.
VAT & Service Tax on 16 Lakh = 5% of 16 Lakh = 80,000/-
Gross Total Taxes before GST = 1,20,000/- + 80,000/- = Rs. 2,00,000/-
Caution: Registrar office will register under-construction flat when registration charges are duly paid. They do not consider about GST payment. So, builders generally either don't mention about GST or say that ZERO GST to the customers and complete the flat purchase transaction. After a while, service tax department will serve payment due notice to buyers of the flat with "late payment penalty".
Afterword: Please note that tax amounts are proportionate to sale deed amount. If land rates are increased by 40%, then total taxes to be paid will also increase by 40%. State Government increases land registration values periodically (once in 6 months or year). It is better to complete the transaction before land rates increased.
