The purchase of a home has tax repercussions, being subject to the payment of a series of taxes for both the selling party and the buying party. The new home VAT is considered "first delivery of housing" that is acquired to the developer once the construction or rehabilitation of the housing has ended. In the cases of the first delivery of the developer to the buyer, the buyer is obliged to bear the Value Added Tax (VAT) 4% for homes subject to some protection regime.
In general, whenever a purchase of property is subject to VAT, the buyer must also pay this tax. The house tax is paid by the buyer within 30 business days from the date of signature of the deed of sale by the self-assessment procedure.
The obligation to pay the Tax of Goodwill originates every time a house is transmitted, its payment corresponding to the selling party of the property, although the parties can agree that this tax is paid by the buyer, or by half between buyer and seller or any other possible payment formula.
Real Estate Tax
The Real Property Tax is an annual municipal tax that levies title to the dwelling. The seller must be aware of the payment of the tax before transmitting the house. The owner of a house is obliged to pay annually a municipal tax that is calculated on the cadastral value of the house and that receives the name of House Property Tax. The accrual of this tax occurs on each year, which means that it will have the status of the taxable person, and will be obliged to pay it, who is the owner of the property on that date, without losing its character of the passive subject of the tax by the fact of transmitting the house.
The tax rate for properties in Hyderabad depends on the annual rental value, and the Greater Hyderabad Municipal Corporation (GHMC) adopts a slab rate of taxation for residential properties.
The below formula helps you to calculate property tax:
Annual property tax = Plinth area x Monthly rental value per square feet x 12 x (0.17 – 0.30) depending on MRV and based on slab rate of taxation – 10% depreciation + 8% library cess.
Are you thinking about buying a home? One of the most repeated mistakes is to think only about the price and leave out the costs of buying a house, which will add between 10% and 20% additional taxes, management costs, and other mortgage expenses. Nowadays, practically no entity is going to help you with those expenses. And it is that if mortgages to 100% that exceed the value of the house are still more. So it is important that you know how much it costs to buy a house and what concepts they can charge you for.
Expenses in the Purchase of Housing
The additional costs of buying a house vary depending on whether the apartment is new or second-hand and whether or not you need a mortgage. However, there are also standard procedures in all cases. They are the following:
Notary - The notary will be responsible for raising the document of purchase and sale of the house to the public deed, and it is obligatory. He is the one who attests to the signature and is responsible for clarifying any doubts regarding the contract. The cost of the notary is legally regulated, and some maximums cannot be exceeded. The cost is linked to the value of the operation and the price range of a property.
Property Registry - Once you sign the deeds of the house, it is essential, although not mandatory, to register them in the Land Registry. This procedure can be done on your own, although you will also have to pay the fees depending on the price of the house. The most usual thing is that it is the agency or the notary's office that is in charge of doing it, although there are also specific agencies that can carry out the process.
When selling or buying a house in Hyderabad, it is common to leave out of the budget the taxes that must be paid, but fulfilling these obligations maintains your tax situation in order, and your heritage will be free of legal problems.
When buying a house, what tax should be paid?
At the time of the sale of a house, there are two acts: a person buys, and another sells the property. Each one must cover their taxes, whoever buys is responsible for the Tax on the Acquisition of Real Estate or the Tax on the Transfer of Ownership. The different states collect this and are calculated on the highest value of the operation. It is very essential to note that this changes from state to state.
When you sell a property, what tax should be paid?
Whoever sells must pay the Income Tax for the utility it receives from the sale (the difference between what it paid for the property and the price at which it was sold). That tax only applies to the utility. You can enjoy that benefit once every three years. The requirement for the seller is to accredit the notary with documentary elements that effectively is the owner of the house that sells.
How do these taxes work? And how do they affect the time of buying and selling a house?
The payment of both taxes must be proportional to the value of the operation that is being carried out, in an act, the amount is determined. When the acquisition of the property is made, the notary must withhold that tax from the buyer, to later report it and pay it to the corresponding authority. The use of land and the sale price will determine the payment or exemption of this tax.
When it comes to buying an office, commercial premises, a factory, etc., in addition to the deed and tax paid by the seller, the buyer must pay the Value Added Tax (VAT). When selling a house with commercial land use, for office or an office, of that sale, the amount that corresponds to the land will not generate taxes, but the constructions destined to the office do generate.
When the property you sell is for residential use, but you had it rented. Then, not being able to show that it is inhabited by you, of the utility that you receive, you are going to have to pay a tax, which is like the one that any of us pays for the income that you receive. A house with a small shop does cause VAT for the value of the buildings that correspond to the premises. But the amount of the constructions destined to the home and the land does not generate this tax.
Is it necessary that a notary or a lawyer give faith to this type of transaction in the contracts from the beginning?
Yes, it is necessary because doing this type of operation before a notary implies that things are done well legally. The lawyer is optional, as he is an advisor so that the processes are oriented to the benefit of his client.
Impartially, the notary must give a translation of ownership of the real estate to certify that he sold who had to sell and bought who had to buy, rectify that the seller could do so without depending on someone else and that the buyer acquired the property without any problem. Also, it guarantees that you as a seller, you will not have problems after the sale. And to the buyer, who will not have problems with the property.
Is it necessary for the person who buys to be registered with the Treasury?
Yes, because the notary declares that tax, but you have to prove that you are the one who paid it, and to prove to the government that you were the one who generated this tax you need to be registered.
If you are thinking of investing in the one acquire a house, you will have to contemplate the chapter of taxes to pay for the purchase of housing. In general, the different taxes to be paid will depend on whether we talk about the new property purchase taxes or, on the contrary, it's a second-hand property. Are you not clear about your tax obligations? Discover which ones are based on the type of home you are going to acquire.
The VAT (Value Added Tax) for the purchase of new housing is the main tax that you will have to pay in case you opt for a new building promotion. The amount will be the result of multiplying the price of the house by the current tax rate. You will have to pay the amount stipulated to the seller who, in these cases, is the one who makes the income in the Treasury.
The Tax on Documented Legal Acts
The chapter on taxes in the purchase of housing is completed with the tax-related to Documented Legal Acts that, among other things, taxes notarial documents. That is when you sign the deed and the registration in the Property Registry before a notary. This tax has a variable fee and a fixed one, a differentiation that will also serve to clarify how much you have to pay depend on a type of home or apartment in Hyderabad that you by.
Other Taxes to Consider
So far the taxes for home purchase, but what other taxes will accompany you on your journey as an owner? The truth is that many of these issues will depend on the City Council, although one of the most popular is the Real Estate Tax. It is an annual tax and is related to the property value of the house. Beyond these property purchase tax should be added, besides, other issues such as notary fees or registration so, before starting the transaction should make clear about your budget.
The property tax charges vary depending upon the state. You have to understand the necessary sales tax provisions before buying a house in the area where you decided to live. However, tax implications shouldn’t necessarily be the driving factor in any financial decision, including where you live. Fortunately, qualifying for federal-level tax breaks like the mortgage interest deduction can help reduce your tax burden.
If you are willing to buy a home this year, be sure to keep all important purchase-related documents organized in one place. Having your home purchase information on hand when it’s time to file your federal income taxes can help ensure you make the most of every home-related credit. PropertyAdviser.in, as a pioneer in property directory in Hyderbad, is furnishing detailed information of all properties in Hyderabad. Here you can find the latest information about all properties like available units, facings, price per square feet, construction status, RERA approvals, and many more in one place. Visit us to make wise investment decisions.
By: Shailaja K