There are many things to keep in mind and understand while buying property and one of those is taxes. It is important to be aware of the various taxes involved in the process to avoid any unpleasant surprises. So let us break down everything you need to know about tax on buying property in India in simpler terms.

Tax on Buying Property in India

Stamp Duty (SD)

Stamp Duty is the tax paid to the State Government on purchase of a property and it can vary state by state. It is crucial for registration of the property and gives proof of ownership.

Typically varying between 5% to 7% of the property’s market value or agreed sales price or whichever is higher, some states also offer concessions to women buyers, senior citizens, etc. Sometimes states reduce stamp duty to boost real estate by offering a limited time reduction in Stamp Duty such as during Covid.

Why is SD important?
Without paying Stamp Duty, ownership cannot be established. It is compulsory in order for the property to be legally transferred in your name.

Registration Fees
Registration fee is the charge or tax that is paid for the property in India to be registered in your name with the local municipal authority.

Usually the registration fee is 1% of the property value which also includes the administrative cost to update the government records to reflect the new ownership under your name.

Why is Registration Fee important?
The fee protects you from potential disputes or claims on your property in future. Basically it ensures that the property is legally registered/recorded in your name in Government records.

Goods & Services Tax (GST)

GST is the value added tax that is levied on goods and services that include under construction properties in India.

For under construction properties the GST is 5% of the property value. However, for affordable housing the GST is 1% of the property’s value. Completed properties or ready to move in constructions are exempted from this tax.

Why is GST important?
GST simplifies the taxation process by combining multiple indirect taxes during the process. Knowing this rate certainly helps the buyer calculate or anticipate the total purchase price of the property in advance.

Tax Deducted at Source (TDS)

On buying a property that costs more than 50L INR, you are required to deduct 1% of the property’s sale price as TDS and remit it to the Government.

The TDS rate is 1% of the sale price of the property.

Why is TDS important?
This tax ensures that the seller declares the transaction to the income tax department which ultimately contributes to transparency and compliance with Indian tax laws.

Capital Gains Tax (CGT)

If you sell a property, you may be liable to pay Capital Gains Tax to the Government on the profit earned from that sale. Now there are two types of CGT – long term and short term.

Short Term Capital Gains Tax (STCGT) – If you sell the property within three years of purchasing it, then the profit is added to your income and charged according to your income tax slab.
Long Term Capital Gains Tax (LTCGT) – If you sell your property after three years of purchasing it, the property is taxed at 20% with indexation benefits.

Why is CGT important?
Understanding capital gains tax helps you plan our finances in a better way especially if you plan on buying and selling property for investment purposes.

Property Tax

Property tax is a tax on buying property in India that is paid annually to the local municipal corporation for upkeep of basic civic amenities such as roads, sewage and public spaces.

The rate depends on property size and location as well as whether the property is residential or commercial. Online calculators are typically provided by the municipal authorities of your area which will help you determine your property tax liability.

Why is Property Tax important?
Paying property tax timely helps maintain and develop local infrastructure and ensures your property is not subject to service disruptions or legal penalties.

Purchasing a property in India entails numerous taxes which greatly affect your financial planning. The comprehension of these taxes on buying property in India, that range from stamp duty and registration costs to GST and TDS can enable you to make well-informed choices while avoiding any unforeseen expenses incurred along the way. Furthermore, having knowledge about the available tax benefits could help in maximizing savings thereby rendering home ownership affordable.

Are you looking for a property in Pune? We can show you the best properties in the city and assist you with everything that goes with buying a property – home loan approvals, documents needed to buy property in Pune, tax benefits, affordable housing schemes and more. Get in touch with our expert today!

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