In terms of calculating the cost on which TDS needs to be calculated, everything paid to the seller in consideration for property is considered i.e.
• Basic cost
• IDC, EDC, PLC
• Fire-fighting equipment
• Electrification, wiring expenses etc.
Anything paid to the third parties or other authorities are excluded
• Stamp duty
• Registration fees
• Any payments to government authorities.
• Taxes charged by the builder
In case a ready property is being purchased from an end user, then everything paid to the seller in consideration for the property as per the agreement-to-sale is considered.
A new section 194IA has been inserted in the Income-tax Act, 1961 by the Finance Act, 2013. It provides for tax deduction at source on transfer of certain immovable property other than agricultural land of Rs. 50 lakh or more.
As per this new provision, any person, being a transferee responsible for paying to a resident transferor by way of consideration for transfer of immovable property other than agricultural land, shall at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, is required to deduct an amount equal to 1 percent of such sum as income-tax thereon specially when the value of the immovable property is Rs. 50 lakh or more.
The buyer needs to pay the following taxes at the time of registering the property:
• TDS or tax deduction at source on amount exceeding Rs 50 lakhs for the purchase of immovable property excluding agricultural land. The TDS must be submitted in the name of the seller.
• Stamp duty on registration
• Service Tax is 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-use property is purchased from the seller then service tax is not applicable.
• Value Added Tax (if applicable in the state)
TDS- 1% on the amount exceeding Rs 50 lakhs
Stamp duty depends on the state and municipal laws
Service tax- 12.36% if the property is being developed by a builder/developer as a service for buyers.
The income tax rules define gain in two broad categories; namely short term capital gain (STCG) and long term capital gain (LTCG). Any gains arising by selling a property after holding it for 3 or lesser number of years, is short term capital gain. Any gains arising by selling the property after holding it for more than 3 years comes under long term capital gain.
For short term capital gain, the capital gain from asset is added to the investor’s income and taxed as per the income tax slab they fall under.
For long term capital gain, tax liability is determined based on indexed cost of acquisition and improvement. Indexation is a concept, which factors inflation in its calculation by using a factor called cost inflation index (CII).
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.
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.
There are no tax implications for making investments in real estate.