One must agree that life doesn’t always turn out the way we plan. The same applies to the property dealings as well. To seal a property deal without any hurdles, it takes an understanding between both parties. And in some instances, these discussions may turn out to be unethical ones, that can also result in a deal being abandoned halfway.

The reasons can be several — it may be from the buyer’s side like they were unable to adjust full cash, or from the seller’s side due to some litigation. Before entering any property deal, agreeing for terms and conditions, a buyer pays a token amount to the seller. Irrespective of reasons, there remains a crucial point on how to refund the money back to the buyer for a cancelled property deal. Let’s see some of the scenarios on how hassle-free you can make the entire process of refund of stamp duty and registration charges telangana.

Refund of Stamp Duty Charges

Stamp duty is one of the necessary steps for all property transactions. To legalize the registration process, a buyer is needed to pay stamp duty charges. These charges can be a specific number or a percentage in the total value of the property as per the market value. 

Stamp Duty is collected whenever there's a transfer of assets or property from one person to a different. It is managed by the regime and is ruled below the Indian Constitutional Stamp Act 1899. As the individual states levy the stamp duty charges, the token money refund rules as per the state. 

Stamp duty refund must be processed within six months from the date of issue of the circular in respect of previous claims for the cancellation of the property deal. A 10% amount is deducted from the total paid stamp duty charges. The applicant that wants to have a refund of stamp duty and registration charges telangana must apply to the concerned district Collector/SubCollector/Dy.Collector/R.D.O/M.O.R. 

The applicant needs to specify the reason for the cancellation of the property deal along with the stamp duty paid challan and receipt issued by the source of the bank. 

Also Read : Gift Deed Registration Charges and Stamp Duty 

Income Tax implications for Cancelled Property

In case of property deals for the acquisition of any assets. Once the conflicting terms and conditions for the transfer of the property are arranged, the customer usually pays some amount as token money. The quantity of money could vary, from being merely a token to a considerable proportion of the worth of the property.

Treatment of such money accepted before the finalizing of a property deal comes beneath the taxation laws. If the vendor backs from his commitment from selling his property. There aren't any immediate monetary implications. Except that the customer gets a right to file a suit for carrying into action within the courts of law and demand that they get refunded the money they lost within the property dealing.

If the customer backs out from the property deal, the vendor has the right to forfeit the money paid. With relevance such as lost money, the customer cannot claim any taxation profit, as this can be treated as a financial loss beneath the tax laws. 

However, the money becomes the seller’s financial gain for that year and is thus taxable. Such cash comes beneath the bracket of financial gain from different suppliers and isn't taxed as capital gains, although the money comes from a capital source like property quality. 

How to Get Refund of GST for Cancelled Property?

If someone tends to purchase an under-construction property, as per the present laws, the developer levies a GST on the agreement worth, at a fixed rate. The price depends on the classification of the property and whether or not it's a reasonable housing property.

If in case, a property deal doesn't undergo and gets abandoned mid-way by the buyer, the vendor might refund the booking quantity and installments paid based on the market value.  Any GST that has been collected by the builder might not conform to repay this quantity reckoning that he has already deposited the credit over to the govt.

The builder won't be entitled to assert any refund concerning the GST. As he has already rendered services to you if you want to transfer your under-construction property rights to another one. 

With mentioning the same to the developer, you can sell the rights that are inclusive of GST. But, you will further be unable to recover any GST paid on such transactions. The capital gains are subject to long-run if your holding amount has been three years. Or else, the profits, if any accomplished, are taxed as short-run capital gains.

Conclusion

When it comes to refunds, there are no particular rules in property dealing as it depends on specific scenarios. To be on the safer side, never pay in cash, and always ask for a receipt. Irrespective of you being a buyer or seller, give a genuine reason for withdrawing from a project, explain yourself so that you don’t need to go through a hectic process. During the token money refund rules process, request for a written document with deduction specifications, since it may come handy in future.

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By: Shailaja K