INFORMATIVE
Income Tax
Here is some basic information about taxation in India related to the real estate industry
Income Tax on Real Estate Transactions
When an individual or entity sells a property, they may be liable to pay income tax on any capital gains earned from the sale. Capital gains are categorized into two types: Short-term capital gains (if the property is held for less than two years) and Long-term capital gains (if the property is held for more than two years). The tax rates for short-term capital gains are usually higher than those for long-term capital gains.
Goods and Services Tax (GST)
In 2017, India implemented the Goods and Services Tax (GST), which replaced various indirect taxes, including the Value Added Tax (VAT), Service Tax, and Central Excise Duty. Under GST, the sale of under-construction properties attracts a certain percentage of tax, depending on the property's value and location.
Property Tax
Property tax is levied by local municipal bodies or authorities on property owners. The amount is generally based on the property's value, size, and location. Property tax revenue is used to fund local services and infrastructure.
TDS (Tax Deducted at Source)
If a property is sold for a certain threshold amount, the buyer is required to deduct TDS at the prescribed rate before making the payment to the seller. This TDS is then deposited with the income tax department.
Capital Gains Tax Exemption
Under certain conditions, the capital gains tax on the sale of a residential property can be exempted if the proceeds are reinvested in purchasing or constructing another residential property within a specified time frame.
Stamp Duty
Stamp duty is a state-level tax imposed on property transactions, including sale deeds, gift deeds, lease agreements, and mortgage deeds. The rates vary from state to state.
Real Estate Investment Trusts (REITs)
REITs are investment vehicles that allow individuals to invest in income-generating real estate properties without owning them directly. REITs receive certain tax benefits, and investors may be subject to dividend distribution tax on the income earned from REIT units.
Please note that tax laws and regulations can change over time. For the most up-to-date and accurate information on taxation in India related to the real estate industry, it is essential to consult a qualified tax professional or refer to the official government sources.