Types of Taxes and Duties to Be Paid While Purchasing a Housing Property

Dev Singhraha

Relocation Expert

As it’s said; “everything comes with a price” so is it in the case of your house of dreams. Every property comes with a price tag and such price tag includes different taxes and duties.

Which need to be paid while buying the house lets understand in detail types of taxes and duties which need to be paid while buying a housing property:

A large part of property cost includes different taxes and duties which are further bifurcated into four parts which are stamp duty, registration charges, value added tax[VAT], service tax[ST]. these taxes are levied upon while purchasing of property.
The rates of stamp duty, registration charges, and value added tax [VAT] may vary from different state to state but the service tax charges are uniform and under central government’s control.

Service tax
Service tax is levied by the central government and is fix and universal in the whole country. Service tax is levied upon under construction property and not on ready to move into apartments. Service tax is charged on the basic cost of property. The service tax directly goes in the pocket of central government. While the different rate of service tax is charged on other cost factors like maintenance charges, floor rises charges, preferential location charges, club house charges etc. Service tax is levied by central government upon the buyer for the services rendered by them from the developers.

Value added tax [VAT]
Value added tax is levied upon movable properties where it involves the transfer of goods from one person to another but here vat is levied upon transfer of rights from developer to the buyer in the form of a sale agreement. Vat is not calculated upon ready to move into apartments. Vat is currently charged at one percent on ‘agreement value’ in Mumbai and Pune and varies from state to state. The tax is governed by ‘work contract’ in the VAT law. Vat is specifically mentioned in the sale agreement mentioning the party to bear the charges.

Stamp duty charges
Stamp duty is payable to state government. Stamp duty may vary from different state to state and property to property. A sale agreement not stamped well does not allow it to stand in the court of law. Payment of this duty recognises the legal status of the transaction of property.

Registration charges
The agreement executed between the buyer and seller needs to be compulsorily registered with the registrar as per the registration act 1908. Failing to do so does not help to stand as evidence in the court of law. Registration charges are usually borne by the buyer it may be by the seller if they had a mutual agreement which can be mentioned in the agreement papers. The registration charge directly goes in the pocket of state government.

Additional points regarding such taxes and duties

In case of read to move in apartments service tax and Value added tax is not applicable but if it’s under construction property all the taxes and duties are mandatory. If in the ready to move in apartment if the buyer is buying from the developer and if the occupancy and completion certificate is received than service tax need not be paid.
All the taxes and duties need to be paid by the buyer itself but due to slag period and bad market conditions developer may bare the stamp duty, and registration charges. While the Value added tax and service tax is borne by the buyer himself so it’s the responsibility of the developer to collect service tax and Value added tax and deposit it with the government.
If the registration charges and stamp duty are not paid the registration would itself be incomplete and there will be no transfer of the title. This will not allow to stand as the evidence in the court of law.
All the taxes except service tax vary from state to state and different kind of property to property. Service tax is charged at 4.5 percent if the worth of house is more than RS 1 crore and 15 percent of floor rise and other charges.
Service tax is charged at 3.75 percent if the worth of house is less than RS 1 crore and 15 percent of floor rise and other charges.

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