Tax Implications for Property Sellers and Buyers

Buying or selling a property has significant implications on an individual’s taxability. Such implications must be assessed carefully before arriving at a purchasing or selling decision or making any transaction.

Regardless, both the buyer and seller need to bear taxes levied upon the sale of the property. These taxes are paid either to the local government or the concerned municipal corporation.

Several municipal corporations in India allow hassle-free payment of property tax online. Such an online process involves minimum documentation and saves the individual’s time and effort as well.

It would thus be ideal to know about the taxes involved in a property sale to help prepare for the same in case of a property transaction. While buying or selling a property, there are several factors determining the taxability besides affecting how one can claim tax exemption.

pay property tax online

Tax implications for sellers

It is crucial to properly time the sale of a property for one to enjoy favourable tax benefits from a seller’s perspective. Based on the timing of property sale, there are two types of capital gains or profits on which taxes are levied.

  • Short-term capital gains

If the property is sold within 3 years of acquisition, the profit made on it is called short-term capital gain (STCG). In this case, there is no tax exemption. The sales proceeds are added to the seller’s or property owner’s income. Further, the seller eventually has to pay house tax, applicable as per his/her income tax slab rates.

It is important to pay land tax timely, or it might lead to legal issues at later stages. One can choose to pay property tax online to make timely payments without any hassle.

One should also pay the tax online as the receipts can help support the document requirements when availing high-value loan products such as loan against property.

  • Long-term capital gains

In case the property is sold after 3 years from the date of possession or acquisition, the profit made on the invested capital is referred to as long-term capital gain. In this case, the seller must pay 20% of the profit as tax.

This tax also includes indexation, and the seller enjoys further tax exemption as inflation is considered during the property’s holding period.

Tax implications for buyers

If one is looking to buy a property, the individual is required to pay property tax to the municipal corporation. One can easily pay land tax online by visiting the local municipal corporation’s official website.

The steps to pay property tax online will be elucidated below, but first, it is advised to know the different taxes involved while purchasing a ready-to-move property or an under-construction property.

  • Taxability while buying an under-construction property

A buyer has to pay statutory and legal costs such as property tax, which is equivalent to 15-20% of the overall property cost. This tax includes stamp duty, registration and GST. Usually, stamp duty accounts for 5-7% of the total property acquisition tax.

While registration accounts for 1% of the property cost, whereas a GST rate of 12% is applicable to all properties under construction on such property’s base cost.

Besides stamp duty, registration and GST, TDS (tax deducted at source) is also deducted at 1%, if the house is worth 50 lakhs or above. Failure to submit this tax to the Income Tax Department can result in penalty and interest on the buyer. Hence, one should pay property tax online timely to avoid such untoward issues.

  • Taxability while buying a ready-to-move property

One advantage of buying a ready-to-move property is that the purchase is exempt from GST. The buyer only needs to pay stamp duty and registration charges as taxes, and this corresponds to 7-8% of the total property cost.

Therefore, ready-to-move properties offer appreciable tax benefits to buyers. Further, timely payment of property tax can help individuals avail favourable loan options later.

Simple steps to pay property tax online

To pay house tax without any hassles, one should know how to pay property tax online. The given steps usually suffice:

  • First, one needs to visit the concerned municipal corporation’s official website.
  • Next, the individual must navigate to the necessary section to file the property tax returns.
  • One should now fill in all essential details like ownership status, building type, exemption category, etc. before proceeding to pay the tax.
  • Once the payment is complete, one can download the tax receipt online.

The online property tax payment method gives one access to the necessary details and payment e-receipts. Such receipts form an essential part of documents required under the step-by-step guide to avail a loan against property.

These receipts can thus help one avail attractive loan products like loans against property from select lenders.

These lenders also provide pre-approved offers on several financial products like home loans and loans against property. Borrowers can avail financing within a short time via such offers. Individuals can check their pre-approved offer by entering their name and phone number.

So, buyers and sellers must be careful while timing a property’s sale. The information provided here can help individuals make informed choices, which in turn, can help them enjoy tax benefits.

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