Real estate transactions are one the most important deals that involves huge amount of money changing hands between both buyers and sellers of that concerned real estate transactions. For instance, in Hyderabad alone there was 67% rise in residential unit sales during 2014-15 when compared with the previous years. The number of residential units sold stood to 7000 in the same period.
This show how there is huge real estate transactions are taking place in the city of Hyderabad and its outskirts. In such cases, there are some guidelines to be followed by both buyers and sellers regarding the taxes and duties to be paid for real estate transactions in Hyderabad. Each of these duties and taxes that needs to be paid by buyers and sellers of properties in Hyderabad have been explained herein under-
Stamp Duty – Payment of Stamp Duty is an important duty or payment that should be paid under the Indian Stamp Act – 1899. Absence of Stamp Duty Payment can attract penalty or imprisonment as it is an efficient revenue generation instrument for state governments. The buyer or purchaser of the property is usually required to pay stamp duty to the government authorities.
Stamp Duty is a type of tax levied by the government both in fixed and varied rates that is based on the value of the instrument, service, or property that depends upon the type of the document. Without the payment of Stamp Duty, documents pertaining to real estate transactions carry no consequences legally or financially. In case of any legal disputes between the buyer and seller or vice versa of the property, both civil and criminal courts does not accept documents on which appropriate or stipulated Stamp Duty is not paid.
Service tax – Service tax is another type of tax that is charged by the Central Government that is applicable for under construction property. The buyer is legally required or responsible to pay service tax on the property price when purchasing a property from a real estate developer or builder before the buyer takes possession of such property that may be an apartment, villa, flat, bungalow etc. For instance, service tax on property costing Rs 75 Lakh comes to Rs.2.81 Lakh (3.75% of Rs.75 Lakh). Service tax also covers the brokerage that a buyer or seller pays to a real estate agent or broker.
VAT (Value Added Tax) – VAT or Value Added Tax is a type of Indirect Tax that is liable to be paid by the builders on under construction property. The builders or developers of the property pass on this VAT to the final buyers of the property. The VAT rates vary from state to state. For instance, VAT in Karnataka is 5.5%.
TDS (Tax Deducted at Source) TDS comes under the provisions of Income Tax Act under section 194(A). This tax involves deducting some percentage of amounts during a transaction and is similar to the concept of “Pay as you earn”. According to this section, an individual is responsible for paying for purchase of immovable property or land shall at the time of payment needs to deduct an amount equal to 1% of the price of the property before paying the amount to the seller or the transferor. This 1% TDS needs to be deposited with the income tax department using Form 26QB.
These taxes/duties are needed to be paid in case of real estate deals or transactions in Hyderabad.