Taxes - Under Construction Flat Purchase
Last Update - 15-April-2021
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 - 20 Lakh, Extra works agreement to bank - 18 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 - 20 Lakh, Extra works agreement to bank - 18 Lakh
3. Bank loan amount availed - 80% of purchase cost = 30 Lakh
(A) - Registration Charges - by State Government :
Registration charges in Andhra Pradesh as on 1-April-2021 - 7.5% of sale deed amount
(7.5% = 5% stamp duty + 1.5% transfer duty + 1% registration fees)
Registration charges - 7.5% of 20 Lakh = Rs. 1,50,000/-
* Please note that documentation charges and other formalities are extra to this.
Registration charges in Andhra Pradesh as on 1-April-2021 - 7.5% of sale deed amount
(7.5% = 5% stamp duty + 1.5% transfer duty + 1% registration fees)
Registration charges - 7.5% of 20 Lakh = Rs. 1,50,000/-
* Please note that documentation charges and other formalities are extra to this.
(B) - GST - by Central Government :
From April-2019 onwards, GST is charged as below for under-construction flat purchases.
- Flat plinth area is less than 90 sq.mtrs or 990 sq.fts (mostly 2BHK)
GST Charges - 1% of sale deed amount = 1% of 20 Lakh = Rs. 20,000/-
- Flat plinth area is more than 90 sq.mtrs or 990 sq.fts (mostly 3BHK)
GST Charges - 5% of sale deed amount = 5% of 20 Lakh = Rs. 1,00,000/-
From April-2019 onwards, GST is charged as below for under-construction flat purchases.
- Flat plinth area is less than 90 sq.mtrs or 990 sq.fts (mostly 2BHK)
GST Charges - 1% of sale deed amount = 1% of 20 Lakh = Rs. 20,000/-
- Flat plinth area is more than 90 sq.mtrs or 990 sq.fts (mostly 3BHK)
GST Charges - 5% of sale deed amount = 5% of 20 Lakh = Rs. 1,00,000/-
(C) - Other Govt Taxes :
Electrical Connection Deposit and Transformer charges - 35,000/-
Labour CESS charges - 15,000/-
Documentation and formality charges - 30,000/-
Electrical Connection Deposit and Transformer charges - 35,000/-
Labour CESS charges - 15,000/-
Documentation and formality charges - 30,000/-
(D) - Home Loan Charges by Bank (around 30 Lakh loan) :
Loan processing fee - 0.4% of loan + GST - Min.10000/- to Max.25000/-
Legal Opinion and Valuation charges - 10,000/-
Flat Mortgage charges - 0.5% of loan + 400/- = 15,400/-
Property insurance (mandatory as per RBI) - around 25,000/-
Gross Total of Taxes on 20 Lakh property purchase - for 2BHK = around Rs. 2,50,000/-
Gross Total of Taxes on 20 Lakh property purchase - for 3BHK = around Rs. 3,30,000/-
Bank loan charges - around 50,000/-
Before GST implementation (i.e., before July-2017),
VAT (1.25%) + Service Tax(3.75%) = Total 5% used to be charged.
VAT & Service Tax on 20 Lakh = 5% of 20 Lakh = 1,00,000/-
Loan processing fee - 0.4% of loan + GST - Min.10000/- to Max.25000/-
Legal Opinion and Valuation charges - 10,000/-
Flat Mortgage charges - 0.5% of loan + 400/- = 15,400/-
Property insurance (mandatory as per RBI) - around 25,000/-
Gross Total of Taxes on 20 Lakh property purchase - for 2BHK = around Rs. 2,50,000/-
Gross Total of Taxes on 20 Lakh property purchase - for 3BHK = around Rs. 3,30,000/-
Bank loan charges - around 50,000/-
Before GST implementation (i.e., before July-2017),
VAT (1.25%) + Service Tax(3.75%) = Total 5% used to be charged.
VAT & Service Tax on 20 Lakh = 5% of 20 Lakh = 1,00,000/-
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.
