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/-
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 a year or 2 years). It is better to complete the transaction before land rates increased.
