FAQs

You can own as many properties as you want.

The buyer needs to pay the following taxes:

• TDS or tax deduction at source on amount exceeding Rs 50 lakhs for the purchase of property excluding agricultural land.
• Stamp duty
• Service Tax - Applicable if the property is being purchased from the builder who conceived and constructed the project before offering possession to the buyer. If a `ready to move in' property is purchased from the seller, service tax is not applicable.
• Value Added Tax (VAT) - If applicable in the concerned state.

TDS- 1% on immovable properties (except agricultural land) exceeding Rs 50 lakhs.

Stamp Duty - Depending upon  state and municipal laws

Service Tax- It is a central tax paid for the services offered by the developer to you.  From April 1, 2015 onwards, if the apartment is worth less than Rs 1 crore, or has a floor area less than 2000 sq ft, the service charge levied is 14% on car parking and preferential location charges (PLC) and 3.50% on the basic sale price.  If the apartment is worth over Rs 1 crore, or has a floor area greater than 2000 sq ft, the service tax levied is 14% on car parking and preferential location charges (PLC) and 4.2% on the basic sale price of the flat.

WHAT IS STAMP DUTY AND WHO IS LIABLE TO PAY THE STAMP DUTY, THE PURCHASER OR THE DEVELOPER?

Stamp Duty is a tax, similar to sales tax and income tax collected by the government, and must be paid in full and on time. A stamp duty paid instrument/document is considered a proper and legal instrument/document. The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary. Section 30, of Bombay Stamp Act, 1958 states the liability for payment of stamp duty. The document can be stamped online as well.

WHICH ARE THE INSTRUMENTS THAT ATTRACT THE PAYMENT OF STAMP DUTY?

The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.

WHAT IS MEANT BY THE MARKET VALUE OF THE PROPERTY AND IS STAMP DUTY PAYABLE ON THE MARKET VALUE OF THE PROPERTY OR ON CONSIDERATION AS STATED IN THE AGREEMENT?

Market value of the property as ascertained by the stamp duty authorities on the basis of a ''Ready Reckoner'' which gives the per sq. mtr. value of each village, zone and sub-zone . The ready reckoner is normally published on 1st January of every year. The Stamp Duty is payable on the agreement value of the property or the market value which ever is higher.

Usually different rates for stamp duty are applicable for residential and non-residential property. In Maharashtra, the rate of stamp duty is 5% for both residential and commercial property. However, for residential property there is a slab wise concession.

WHICH ARE THE INSTRUMENTS THAT ATTRACT THE PAYMENT OF STAMP DUTY?

The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.

IS STAMP DUTY PAYABLE WHEN A FLAT IS FROM A RELATIVE TO OTHER RELATIVE BY WAY OF A GIFT?

Yes. Stamp duty has to be paid on the gift but the rate of duty is lower. In Maharashtra the sale of a flat attract levy of duty of 5% and a gift attracts levy of 2%.

WHAT ARE THE CONSEQUENCES OF DELAY OR NON-PAYMENT OF STAMP DUTY ON AN INSTRUMENT?

Delay in payment of stamp duty attracts penalty at the rate of 2% per month on the amount of the stamp duty that has to be paid, up to a maximum of twice the amount of the stamp duty payable. An instrument, which is not properly stamped, is inadmissible as evidence.

WHAT IS ADJUDICATION?

In case you wish to ascertain the correct stamp duty payable on an instrument, an application can be made to the Collector of Stamps.

IN CASE YOU WISH TO ASCERTAIN THE CORRECT STAMP DUTY PAYABLE ON AN INSTRUMENT, AN APPLICATION CAN BE MADE TO THE COLLECTOR OF STAMPS.

The stamps are required to be purchased in the name of any one of the executors to the Instrument.

Stamp Duty is the tax paid for the legal recognition of property. It is paid by the home buyers. You can claim tax incentives of up to Rs 1.5 lakh on stamp duty and registration charges on a new property purchase or construction of a house. However, these benefits are available for only one self-occupied property.

There are a few exemptions available for long term Capital Gains, if you:

• Buy or construct a new house: If you build a new house or buy one from the money you receive from selling a property, you are exempted from paying the tax on Capital Gains. However, the new purchase should be done either one year before or within two years of sale and the construction should be completed within three years from the date of transfer. The new property bought or constructed should not be sold within three years from the date of its purchase or date of completion of construction.
• Capital Gain Account Scheme- Through the Capital Gain Account Scheme (CGAS), you can save the received money in designated banks. CGAS helps you in buying time to look for suitable investments as it serves to inform the Income Tax department that you plan to invest the money received; but at a later date.
• Invest in Bonds- You can also invest in financial assets or bonds to save tax. Such bonds are issued by the Rural Electrification Corporation and the National Highway Authority of India and should be bought within six months of transferring the property. You can invest a maximum of Rs 50 lakhs through these bonds.

If the house is held for less than three years prior to its sale, it is termed as a short-term capital asset and any gain arising from the sale is treated as a short-term Capital Gain. There are no tax exemptions for short-term Capital Gains and one needs to pay it according to the applicable tax slab.

However, if the property is sold after holding it for more than three years, it is treated as a long-term capital asset and the gain arising from it is called the long-term Capital Gain. Such gains attract a flat exemption rate of 20%.

Yes. Generally, the stamp duty on the gift deed ranges from 5% to 12% in all states. In few states like Haryana, Rajasthan and Delhi, concession of 1 to 2 per cent is given to female transferers.

Property is considered a capital asset and Capital Gains Tax is levied on the gains arising from the sale of property. Such gains are calculated after adjusting the inflation rate, transfer and renovation charges.

Power of Attorney allows a person to authorize another person the right to make decisions regarding the person's assets, finances and real estate properties. There are two types of power of attorney. First, the 'General Power of Attorney' where a property owner confers 'general' rights. The rights include but are not limited to sell, lease, sub-lease etc. The second one is the 'Special Power of Attorney' where only a specific right is given by the owner to the chosen person.

IS A POWER OF ATTORNEY (POA) REVOCABLE?

Yes, a POA can be either revocable or irrevocable, depending on what sort of a POA one has made.

CAN A POWER OF ATTORNEY BE ISSUED TO SOMEONE ELSE TO REGISTER THE DOCUMENT?

Yes, the same is required to be registered in the office of the Sub Registrar in the city you are staying in.

CAN A POWER OF ATTORNEY BE ISSUED TO SOMEONE ELSE TO REGISTER THE DOCUMENT IN CASE OF BEING OUT OF COUNTRY?

Yes, the Power of Attorney Draft can be signed and attested by the Indian Consulate/ Indian Embassy/or local notary. Once the Power of Attorney is received in India, the same has to be submitted to the Collector of Stamps for adjudication. After the same is adjudicated the POA holder can submit the same at the time of registration of the document.

TYPES OF POWER OF ATTORNEYS?

1. Special Power of Attorney

2. General Power of Attorney. Both can be revocable or irrevocable and should confer the authority as desired by the person issuing the POA.

WHAT IS THE DIFFERENCE BETWEEN A GENERAL AND SPECIAL POWER OF ATTORNEY

A general power of attorney gives broad authorizations to the agent. The agent may be able to make medical decisions, legal choices, or financial or business decisions.

A special power of attorney narrows what choices the agent can make. You can even make several different POAs, with different agents for each.

For example, you could create a special power of attorney which only allows your spouse to make medical decisions on your behalf. You could create another POA which would grant a business partner the ability to use certain assets to care for your business in the event you become incapacitated.

In other words, special powers of attorney allow you to be more specific.

IS REGISTRATION OF A LEAVE AND LICENSE MANDATORY AND WHAT ARE THE CONSEQUENCES IF THE SAME IS NOT REGISTERED?

As per Section 55 of the Maharashtra Rent Control Act, 1999 registration of Leave and License Agreement is compulsory and it is the responsibility of the landlord to ensure registration. If the same is not registered, the landlord would be prosecuted and on conviction he's subject to up to three months imprisonment or be subject to fine not exceeding Rs.5000/- or with both. Further in the absence of a Registered Agreement, the contention of the tenant, about the terms and conditions on which the premises have been given to him by the landlord shall prevail unless otherwise proved.

IS THE LEAVE AND LICENSE AGREEMENT GENERALLY SIGNED IN MULTIPLES OF 11 MONTHS OR 12 MONTHS? IS THERE ANY STIPULATION OF TIME?

Formerly leave and license agreements used to be signed in multiples of 11 months or 12 months. After The Maharashtra Rent Control Act, 1999 came into force from 1.3.2000 there is no stipulation as to whether leave and license agreement should be in multiples of 11 or 12 months, and there is no stipulation as to total time period. However, Leave and license agreement generally does not exceed 3-5 years. If it does, it's then called a lease deed.

IS REGISTRATION OF A LEAVE AND LICENSE MANDATORY AND WHAT ARE THE CONSEQUENCES IF THE SAME IS NOT REGISTERED?

As per Section 55 of the Maharashtra Rent Control Act,1999 registration of Leave and License Agreement is compulsory and it is the responsibility of the landlord to ensure registration. If the same is not registered, the landlord would be prosecuted and on conviction he's subject to up to three months imprisonment or be subject to fine not exceeding Rs.5000/- or with both. Further in the absence of a Registered Agreement, the contention of the tenant, about the terms and conditions on which the premises have been given to him by the landlord shall prevail unless otherwise proved.

WHAT IS THE DIFFERENCE BETWEEN LEASE AND LEAVE AND LICENSE AGREEMENT?

Lease is defined under Section 105 of The Transfer of Property Act,1882 and a lease of immovable property is a transfer of a right to enjoy such property for a certain time or in perpetuity on consideration to be rendered periodically or on specified occasions, while a license is defined in Section 52 of the Indian Easement Act,1882, and it does not create any interest in the premises in favour of the licensee excepting a mere right to use and occupy the premises for a limited duration. Both documents have now to be registered. A lease deed is required to be stamped and registered. However the stamp duty payable on lease is more than on Leave and License for a period up to three years. For a period exceeding three years the stamp duty is same for both agreements. The implications of entering into a lease agreement would be:

i) That stamp duty would have to be paid

ii) That the document would have to be registered

iii) That Municipal taxes may go up

iv) Of course, Income-tax would have to be paid on your income; and

v) The question of Wealth-tax would have to be considered. One property is exempt from Wealth-tax. However, if you have any other property, this implication would have to be considered.

WHAT IS A SALE DEED?

Sale Deed, also known as conveyance deed, is a document by which the seller transfers his right to the purchaser, who, in turn, acquires an absolute ownership of the property. This document is executed subsequent to the execution of the sale agreement and after compliance of various terms and conditions detailed in the sale agreement.

CAN POSSESSION BE HANDED OVER TO DO A POOJA ?

While the possession cannot be handed over until completion of the formalities, temporary arrangement could be made to have the apartment kept open for a few hours for the purposes of performing the pooja.

FROM WHAT DATE IS THE MAINTENANCE AMOUNT DUE?

The Maintenance amounts are due from the date the apartment is ready for possession/handover whichever is earlier.

FROM WHAT DATE IS THE PROPERTY TAX DUE?

Property taxes area due from the date the unit is occupied or the date of completion certificate whichever is earlier.

WHEN THERE ARE APARTMENTS OF DIFFERENT SIZES IN A COMPLEX, HOW IS THE MAINTENANCE CHARGE CALCULATED?

Usually, the actual area owned by the individual is the basis for calculation of maintenance charge.

WHAT IS THE PURPOSE OF COLLECTING AMOUNTS TOWARDS SINKING FUND IN CO-OPERATIVE HOUSING SOCIETY? WHAT SHOULD BE THE CONTRIBUTION FROM MEMBERS TOWARDS SINKING FUND? WHEN CAN THE AMOUNT COLLECTED FOR SINKING FUND BE SPENT BY THE SOCIETY?

The purpose of collecting Sinking Fund is to accumulate and keep sufficient funds with the society so that the property of the Society i.e. building can be reconstructed in future. The contribution to Sinking Fund is a statutory obligation. Sinking Fund has to be contributed as decided by the General Body of the Society. It should be at least @1/4 per cent per annum on the cost of the each flat excluding the cost of the Land. On the resolution passed at the meeting of the General Body of the Society and with the prior permission of the Registering Authority, the Sinking Fund may be used by the Society for reconstruction of its building/s or for carrying out such structural additions or alterations to the building/s as in the opinion of the Society's Architect is required for carrying out such heavy repairs as may be certified by the Architect. However, permission is not usually granted by the Registrar to withdraw amounts from the sinking fund.

WHAT ARE NON-OCCUPANCY CHARGES?

Non occupancy charges are levied by the society/condominium/apartment when the flat owner himself does not reside in the flat but rents it out to a third party.

WHAT CONSTITUTES COMPLETION OF THE SALE?

The transfer of a flat is concluded when you have an sale deed/ agreement for sale coupled with actual possession. Generally, in all cases the entire amount is paid simultaneously with the handing over of physical possession and signing of the transfer documents.

WHAT ARE THE TAXATION FORMALITIES I NEED TO COMPLETE WHILE PURCHASING A PROPERTY?

From the point-of-view of taxation, no special formalities are required for completing while buying the property. However, proper Agreement to Sale, etc. must be done and the ownership and the title should be verified to ensure that one does not have a problem at a later stage in respect of such property.

WHAT ARE THE TAXATION FORMALITIES I NEED TO COMPLETE WHILE SELLING A PROPERTY?

a) Sale of residential accommodation may result in a short term capital gain/loss if sold within a period of 3 years or a long term capital gain/loss if sold after a period of 3 years from the date of acquisition (Section 29A, 42A and 47).

b) A short term capital gain/loss will be treated and taxed in the same manner as any other income/ loss.

c) Tax on long term capital gain can be avoided if the sale relates to a property other than one residential accommodation and reinvested in any residential property within a period of 1 year before or 2 years after the date of transfer (Section 54 F).

d)Long term capital gain can also be saved if only the capital gains (and not the total sale proceeds) is invested for a period of 3 years in specific Bonds of National Highways Authority of India or Rural Electrification Corporation Limited (Section 54 EC).

e) Determination of sale proceeds of a Property will be on the valuation adopted by the State Stamp Duty and Registration Authorities and not the amount mentioned in the Deed of Conveyance (Section 50C). This is intended to cover cases where part of the sale price is received by the seller in unaccounted cash.

f) In the absence of either freezing the capital gain in specified securities or reinvested as per clauses (d) and © as above Income Tax is payable @ 20% by the seller on the capital gains computed by deducting from the Sale proceeds the cost of acquisition as increased by cost of living index (Section 112 and Section 55).

HOW CAN I CALCULATE THE INCOME FROM HOUSE PROPERTY?

The systems of calculating income from house property broadly speaking would be as under:

Actual rent received from property

Less: House Tax to the extent actually paid by the assessee

Balance: i.e. Annual Value

Less:1) 30% of the annual values

2) Actual Interest in respect of loan for the property

Net taxable income from house property

The above-mentioned formula would enable most of our readers to claim correct deduction in respect of income from house property.

IS IT ADVISABLE TO CHOOSE A FIXED OR A FLOATING RATE WHEN SELECTING A HOME LOAN?

Choosing the floating rate of interest or not depends upon the perception of the client. Personally I would feel that fixed rate is good so that I am aware of my liability for interest in years to come and when the interestrates are lower on housing then also it is better to think of a fixed rate. However, as the situation stands as on today I feel that the interest on loan taken should be floating rate of interest because correction is expected in the interest in the coming period.

MY WIFE & I HAVE JOINTLY TAKEN HOUSING LOAN FOR A SINGLE HOUSING UNIT. CAN WE BOTH AVAIL TAX BENEFITS IN OUR INDIVIDUAL TAX RETURNS & HOW MUCH?

Relax, be happy and get the benefit of enjoyment of tax deduction for both of you. Please do remember that the benefit in respect of interest on loan as also on repayment of the housing loan, etc. is allowed to each co-owner of the property. Hence, you as well as your wife will be able to claim the benefit of tax deduction in respect of interest (max. 1,50,000 per person ) on loan as well as on repayment of loan.

CAN I AVAIL TAX BENEFITS FOR BUYING LAND? I WANT TO INVEST IN LAND RATHER THAN FLATS AND I WILL AVAIL BANK LOAN FOR THE SAME. CAN I AVAIL A TAX BENEFITS FOR THIS LOAN?

If you want to invest only in land then no income-tax benefit will be available to you. However, you buy the land and thereafter, you construct your house on the same then the total value of your residential property will comprise of cost of land as well as the cost of construction. In this event, you will be able to enjoy the tax benefits on the full amount of the property inclusive of the cost of the land. Please contact your nearest bank for obtaining details about the loan on the land. Generally speaking, a bank will give you loan for construction of the property on the land owned by you. There are options even available where you can obtain loan even on the land.

HOW DO I CALCULATE THE CAPITAL TAX GAIN?

For the purpose of Real Estate, the Long-term Capital gain would be only if you hold the property for more than three years, then it is subjected to tax @20% only. In case you sell the property in less than three years time then it would become short-term Capital Gain and the same is required to be taxed at the prevailing tax schedule of the rate applicable to the assessee depending on his other incomes.

IS THERE ANY WAY I CAN BE EXEMPTED FROM PAYING CAPITAL GAIN TAX?

Innumerable ways and options are available for saving capital gains. For example, in the first place invest in a residential house property or a flat to make investment so as to see that capital gains are exempted. Likewise, if a person were to make the investment in REC or NHAI bonds then also he enjoys complete exemption from the long-term capital gain payable by him in respect of capital gains due.

CAN I INCLUDE FOLLOWING IN COST OF A PROPERTY:-

A) INTEREST PAID DURING CONSTRUCTION PERIOD

B) LOAN PROCESSING FEE

C) BROKERAGE PAID

D) STAMP DUTY PAID

E) MISC. OTHER DIRECT/INDIRECT EXPENSES RELATED TO PURCHASE OF PROPERTY I.E. TRAVEL, CONVEYANCE, HOTEL STAY, TELEPHONE CALLS ETC.

Interest paid during the construction period would enjoy tax benefit in total five years as per s.24 of the I.T. Act, 1961. The Loan processing fee, the brokerage, the stamp duty can be added to the cost of the property. The misc. expenses if they can be attributed directly to the purchase of the property then they would form part of the cost of the property.

ACCORDING TO INCOME TAX LAWS, WHEN IS A PERSON CONSIDERED TO OWN A HOUSE - AT THE TIME OF ALLOTMENT OR AT THE TIME OF POSSESSION?

The ownership for Income-Tax purpose would be when you receive the possession. Even if payment is not made but possession is received, it will be treated as a sale transaction.

The property could be converted from leasehold to freehold if the local laws allow it. For example, properties under DDA can be converted to freehold by executing a Conveyance Deed but the same is not allowed if the property is owned by the Noida Authority.

The difference between a leasehold property and a freehold property lies in its ownership . In a leasehold property, the ownership remains with the concerned local authority or the government (as the case may be). The lease period varies typically between 30 to 99 years. But, this does not prevent the individual owner from selling or perform other transactions with the property, provided the lease deed is registered.

In case of a freehold property, the owner of the property is the legal owner and can sell/lease/rent the property as per his/her wish .

The language of the registration document must be the one that is commonly used in your district. According to Section 19 of the Indian Registration Act, the Registering Officer or the registrar has the power to decline registration of your document if it is presented in a language which is not commonly used in the district unless it is accompanied with a true translation of the language in use.

Yes, you can execute Special Power Of Attorney to get your property registered by someone else.

Registration of a property includes necessary stamping and paying of registration charges for a sale deed and getting it recorded at the sub-registrar's office of the concerned jurisdictional area. If a property is purchased from a developer directly, getting it registered amounts to act of legal conveyance. In case the purchased property is a second or third transaction, it involves a duly stamped and registered transfer deed. Nowadays, property registration process is computerized in most states.