Although GST seems like a move in the right direction as far as the “One Nation, One Tax” structure goes it does bring with it a whole host of questions.
These are some of the frequently asked questions that we get from home buyers and customers who are concerned about how GST will impact their properties and investments.
1: How will GST affect the prices of homes since the tax applies to all supplementary items?
A: Although the GST is a new TAX regime the rates on taxes are similar to those applied previously with VAT and Service tax. There will be a marginal up/down on the prices of homes but the value derived from the credit available should off put the increase in prices
2: How will GST effect Home Loan EMIs?
A: Since Home Loans come under financial services and there is a tax of 18% levied on them EMIs are going to go up. There will be other benefits from the government that should provide some breathing space to home owners though.
3: What would be the impact of the GST on property rentals?
A: There will be an increase in tax rate on the input side. So the tax rates will increase.
4: Will I have to pay tax on the entire amount even if I have only a few EMIs to go?
A: No, as the relevant tax would have been incorporated by the developer, at the time of receipt of the payment or issue of the demand letter for payment.
5: Is it true that under-construction properties will be costlier, compared to ready-to-move-in properties?
A: Buildings which have not received their first occupancy certificate or that are still under constructions will be charged a GST at the rate of 12%. Hence under construction properties will be more expensive.
6: What will be the impact of GST on resale properties?
A: Resale properties will not be considered as “goods” as far as GST is concerned since it is an immovable property. There will not impact on such properties in the next GST regime.
7: Do Businessmen have the ability to avail input credit for GST while buying an office?
A: Since an office will be considered as an immovable property, there will be no GST applied. Since there is no GST there is no option of availing input credits.
8: Why would a developer pass on the GST benefits to home buyers, when they can increase their profit margin by retaining the benefits?
A: It has been strictly mentioned in the Section 171 of the CGST Act 2017 that the developers will have to pass on the benefits of the GST to the buyers. This is called as the anti-profiteering clause. So instead of keeping the benefits, the developers will most likely give them revised prices. How there will be a check on this point is still to be known.
9: Will the GST impact the stamp duty on buying a property? What about registration charges, maintenance charges, etc.?
A: Apartment owners will have to pay about 2.5 per cent additional tax on the maintenance charges. This tax will be applicable on flat owners, who pay maintenance charges of above Rs 5,000, excluding property tax, stamp duty, water charges and electricity charges.
10: What will be the overall increase or decrease in property prices, once the GST is implemented?
A: Ideally since the builders will get an input credit for all the items they use in lieu of their tax liabilities they should be passing these benefits to the end customer and the home prices should come down in the long run. The situation is still being monitored.
The numerous queries related to GST in the real estate Sector, are likely to be answered gradually over time, as people get more acquainted with the new tax law. Although the GST may cause a marginal rise in prices in certain segments of the property market in the short term, in the long run, this tax regime is expected to be a game changer that will boost the growth of the real estate Industry.
It is painful to see a large chunk of your income go as taxes. You try every trick in the book to save much as possible. Among the many popular tax-saving exercises is the formation of a Hindu Undivided Family (HUF) by people belonging to the faiths of Hinduism, Sikhism, Jainism and Buddhism.
Before we move forward let us quickly understand what an HUF is. An HUF consists of a common ancestor and all of his lineal male children together with their spouses and spinster daughters. This means Ram, his wife Sita, their unmarried daughter Rama, their married son Rahul and his wife Rajni can together form an HUF. Rama would become a part of the HUF of her husband’s family once she gets married. At the same time, she would remain part of her father’s HUF.
Because an HUF is taxed separately from its members, it can claim deductions and exemptions under various sections of the Income Tax Act. As a combined entity, member benefits greatly if the HUF is registered and reports its income as a separate taxpayer. In fact, members will find banks more welcoming in case they are approached for a home loan, etc.
However, members an HUF also have to face certain restrictions.
Your share is constantly diluting
Each member has an equal right to the property owned by an HUF. This means the said property cannot be sold without having each member of the family on board. New members that get added to the family by way of birth or marriage also have an equal share in the property. In fact, even an unborn child, who is still in the womb of its mother, has a right to the property.
This means the share of the existing members keeps diluting with new additions. While all goes well till there are no disagreements among members, matters might go out of hand in case of any discontent arises. By its very nature, an HUF is an ever-increasing entity as new members keep getting added. In such a scenario, managing the family and its finances might get quite complex.
Separation may turn ugly
In case there is disagreement among the members of an HUF and they decide to part way, they will have to dissolve the entity through a legal process known as a partition. Cases lying with courts across India testify partition process often goes ugly.
It must be noted here that once an HUF is formed it has to keep filing income tax returns until the time it is partitioned. When an HUF is dissolved, assets held by it are sold to be equally divided among all members. Now, each member will have to pay taxes on the profit thus made; the law perceives this gain as their individual income. Even if a new HUF is formed by married people who have exited the previous HUF, the income of the property would be taxed in the hands of new HUF.
YOUNG WORKING MEN AND WOMEN ARE A MAJORITY OF HOME BUYERS NOWADAYS AT SILIGURI !!
Gone are the days when people used to exhaust their lifetime’s savings and buy homes in all-cash deals towards the dusk of their lives. Back then, taking a loan to finance property purchase was unheard of. By comparison, young working men and women today are a majority of home buyers every year. To become homeowners, people now don’t have to wait till they grow old; easy availability of home loans in the market has done the trick. If one has the means and the inclination to own a house, who wants to live in a rented accommodation, anyway? These were the thoughts that drove Sumit Shah, 29, an employee at a leading Bank at Siliguri, to book a 2BHK house in an upcoming housing complex. Shah patiently paid rent as well as the EMIs (equated monthly installments) till the time he did not get the possession. He argued with himself that he is saving a lot of money by availing of tax benefits on his home loan interest every time doubts started clouding his head over the viability of the purchase. He was a homeowner, Shah would remind himself. He would also remind himself of all the troubles his father Jamuna Lal Shah faced because his and his family had to shuttle between rented accommodations throughout his working career.
Homebuyers these days compare the beauty of being a young home owner with the trouble of living in rented houses throughout their lives. The conspicuous benefits are enough to invest in real estate, without giving much thought to the fact that the hurry is going to cost them dear. No doubt, the joy of living in your home is matchless. But, the flip side is that you have to be mentally prepared to spend a large part of your life, including the youth, under debt. Also, remember that the house still becomes yours only at the end of your 20- or 30-year loan tenure, when you have repaid every penny you owe your bank.
Another aspect to remember is that by the time you become an owner of, say, a 2-BHK unit in a highrise, you might start finding it increasingly difficult to live in an urban set-up. The traffic on the road and elevators in your building might give you discomfort. It is possible that as an older person you would want to have a home in a comparatively small city.
While it is good to own a house at any point in life, it is advisable that one thinks long-term before any investment that has so many financial and sentimental values attached. You should consider all the pros and cons of living in the place where you are buying the property, the features of the property itself, the amount that the property is going to cost you, and then take an informed call.
Visit www.siliguriproperties.com for the best properties at Siliguri or call 99330 22222
Are you planning to sell your property? Well, the profit you earn through the transaction is taxable. Under Indian tax laws, gains arising out of the transfer of a capital asset, which among other things includes property, are taxable under the head “capital gains”. Depending on the period for which the asset is held, the gains could either be taxed under the short-term capital gains (STCG) head or the long-term capital gains (LTCG) head.
Do note here that under the current norms, long-term capital gains are taxed at 20 per cent, plus surcharge and education cess, and short-term gains are taxed at 15 per cent, plus surcharge and education cess.
However, if you plan to use the proceeds of the sale of your old residential property in acquiring another residential property, Section 54 of the Income Tax (I-T) Act saves you from paying the capital gains tax. Also, under Section 54F of the Act, a seller can be exempted from paying LTCG tax even if the saleable property is non-residential, and the profit gained so is being used to buy a residential property.
Now, let us look at what are the terms and conditions to avail of the benefits under Section 54:
To avail of the benefit under this Section, the seller has to be an individual or HUF (Hindu Undivided Family). An HUF includes all members of a family, including the extended family members. Apart from Hindus, HUF laws also cover Jains, Sikhs and Buddhists.
The holding period
The property you sold should be a residential asset and should have been held by you for a long term. In case if you hold the property only for a short-term, you will not be eligible to avail of the benefits. From the assessment year 2018-19, the period of holding, in case of immovable property is reduced from 36 months (three years) to 24 months (two years), to qualify as a long-term capital asset.
Purchase of the new asset
Another condition that you have to fulfill to avail of the benefits under this Section is to buy the new property one year before the sale of the old one or within two years the sale of the old property. In case you are planning to construct a house on your own, the undertaking must be carried out within three years from the date of transfer of your old property.
In case of compulsory acquisition, the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional).
The number cap
Effective from assessment year 2015-16, exemption under Section 56 can be claimed only in respect of one residential house property purchased/constructed in India. If more than one house is purchased or constructed, exemption under Section 54 will be available for one property only.
What if you bought a property outside India using the sale proceeds of a property that you held in India? No exemption can be claimed for the house purchased outside India.
Now, what is the amount of exemption provided under the Section? The lower of following amounts will be exempted:
- The amount of capital gains arising on transfer of residential house; or
- The amount invested in purchase/construction of new residential house property.
Suppose you sold your old property for Rs 10 lakh, earning capital gains of Rs 1 lakh. Now, if you invest Rs 80,000 of this amount in the purchase of a new property, the exemption under Section 54 will be Rs 80,000 while the reaming Rs 20,000 of the gains would be taxable.
What if you are unhappy with the new property and want to sell it soon enough? In such a scenario, you will have to let go of the exemption you claimed. According to the law, the benefit granted under Section 54 will be withdrawn if you transfer the new house within a period of three years from the date of acquisition.
The Act further says that if the capital gains arising on transfer of the house are not utilised, in whole or in part to purchase another house till the date of filing the income tax returns, the benefit of exemption can be availed of by depositing the unutilised amount in Capital Gains Deposit Account Scheme. This provision has come into force with the enactment of the Gains Deposit Accounts Scheme, 1988. You can approach any branch of a public sector bank to deposit this amount. The new house can be purchased or constructed by withdrawing the amount from the account within the specified time-limit of two or three, as the case may be.
The unused amount
In case the amount lying in Capital Gains Account Scheme account is not utilised within a specified period, the unutilised amount, for which exemption is claimed, will be taxed as income by way of long-term capital gains of the year in which the specified period ends.
Are you a homebuyer who has been fence sitting for long now, thinking about various aspects such as quality of the project or the legality of the land or the price, among others? Let us tell you that the recently-implemented Real Estate Law has reset the way developers and homebuyers have been operating in the market. Although too early to review, the developers have already started to conform to the new rules and there are layers of checks and balances that they know they must resort to. Similarly, sales too, have redefined itself. While pre-launches and soft launches have gone away for a greater good, the developer is now keen to please the homebuyer.
How does the developer gain?
Brand management is important for all developers, both big and small, given the reach of the Internet, social media and general awareness with respect to rights and duties a homebuyer has. All this together equips them to make the right decision. Hence, the Law and the Real Estate Regulatory Authority (RERA) ensure that a defaulting developer cannot escape without adequate punishment/penalty. Every developer will be at the risk of losing his standing in the market.
How does the homebuyer gain?
The Law is a win-win for both genuine developers and homebuyers but when you look at it closely, it is evident that latter is better placed than any other stakeholder. Consider the following sales strategies that a developer would align his company with to ensure a homebuyer gets back to him and at a cost that doesn’t pinch either of them.
Focus is on one
Experts suggest that developers have begun to focus on one or two projects at a given time. This practice is expected to ensure that their cash flows are dedicated for the construction of a project than diverting it to launching multiple new projects. Home buyers can now expect a better focus on quality and timely completion.
The large volumes of unsold stock have been a pain point not just for developers but for homebuyers, too. Therefore, sales teams across the offices of various developers are trying to tune down their inventory overhang from that of six to eight quarters to four to five quarters. This will ensure that the right balance of demand and supply is maintained.
Changing pricing strategies
The developer understands that their focus cannot be solely on the price or the profit, especially when the market is striving hard to recover. The focus now should be on the sales even if the prospective buyer asks for a certain bit of discount. And the key challenge for the sales teams remains to bring the potential buyer to the table for a talk and negotiation. Homebuyers, be assured that attractive discounts are not far away.
You are in the limelight
Yes, with the RERA around, a prospective homebuyer will enjoy the limelight. This is primarily because end-users are more active in the market today and the short-term investor class realises that there is practically no income to be made by flipping properties. Therefore, only end-users and long-term investors would be eying a property purchase and when the head count is less, there would be every attempt to tap this investing class. Anyway, unsold stock doesn’t translate into money for a developer, sales at a little less margin surely do.
More personalised meetings
Have you been complaining that you never get to speak to the sales team one on one after you seal the deal? Not anymore! Call it hand-holding but firms are going to make sure that they walk you through the entire home-buying process. Well, sales teams would bring the market to you through various channels like social media – Facebook, Twitter, Instagram etc. The bait would be the right pricing and the right location. Care would be taken to give the right explanations to homebuyers who are hunting for the right home. They realise your value not just as a customer but also as someone who can refer this project to another potential customer. You would be their way of indirect brand building, too.
For more info on RERA, you may call 97330 95555 or email firstname.lastname@example.org to GFS Realtors.