Introduction

Property taxation in India is governed by the Income Tax Act, 1961 (as amended by the annual finance laws) collectively with oblique taxes such as GST, stamp duty, and property tax. As with the maximum property tax regimes, the rules affect the entire life cycle of the construction, ownership, leasing, and use of a property, as well as the depreciation, maintenance and improvement, sale, and use of the property sale proceeds.

●In this type of scenario, section 89(1) of the Income Tax Act can come to your rescue. 

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●If upon receipt of past profits, anticipated profits, or late receipt of the family pension, specific tax relief is allowed under section 89(1).

●Calculate the tax payable on total income, including extra salary – Arrears provided will be replicated in Part B of Form 16. 

●Calculate the tax payable on your overall earnings, apart from the extra salary. You can get the number of additional profits (arrears) from the back file provided by your employer. 

Capital Gains Tax on Sale of Property

Indexation refers to the process of modifying a price, wage, or other value in response to shifts in either another price or a composite indicator of prices. Indexation is a method that can be utilized to either compensate for the effects of inflation, the cost of living, or input prices over the course of time, or it can be utilized to compensate for the differences in prices and expenses that are experienced in various geographic areas.

Among the many gains that can be suggested during your tax return, capital gains are one of the key components. Intuitively, while long-term capital gains (LTCG) refer to an extended retention perspective, on the shorter side are short-term capital gains (STCG).

Among the many gains that can be suggested during your tax return, capital gains are one of the key components. Intuitively, while long-term capital gains (LTCG) refer to an extended retention perspective, on the shorter side are short-term capital gains (STCG).

When selling a property, one of the most rewarding methods to save on capital gains tax is to reinvest the entire profit from the sale into other properties within 2 years. This is one of the satisfying ways to save on capital gains tax. The profits can be reinvested in residential properties and not in commercial ones.

Reporting of High-Value Transactions to Registrars

The department that handles your income tax keeps track of your high-value transactions by using various sources. The department conducts data analysis to identify individuals who do not submit income tax returns or under-report their income on their ITRs. This is done to track any instances of tax evasion and ensure that taxpayers comply with correct and accurate reporting standards. The department has enhanced the ‘Specified Financial Transactions’ section of Form 26AS to reflect the increased importance of these kinds of deals. 

There was news in August 2020 that the income tax departments intended to broaden the scope of SFT and include transactions such as the purchase of jewellery, white goods, paintings that cost more than Rs.1 lakh, hotel expenses that exceeded Rs.20,000, payments to LIC that were greater than Rs.50,000, rent payments that were greater than Rs 40,000 and so on. Formal notification about this matter has not yet been received. When filling up their tax returns, taxpayers must bear in mind any high-value transactions they have participated in.

income tax on real estate earnings

It could prescribe the obligations of such officials. 8. Registry Inspectors .— (l) The 1 [State Government] may also hire officers known as Registry Inspectors and prescribe such officers’ obligations.

(2) Each such inspector will be subordinate to the inspector general. (2) Each of these inspectors will be subordinate to the inspector general. State Amendments, Rajasthan: Replace Section 8, as below: – “8. Registry Officers .— (1) The state government may also hire officers who may be distinctive from time to time and may prescribe the obligations of such officers.

(2) Each officer will be subordinate to the inspector general. [See Rajasthan Act 11 of 1982, sec. 2 (we.f. 06.16.1982)]. Uttar Pradesh:

(i) in paragraph (1), for the words “Inspectors of the Registration Offices”, alternatively the words “Assistant Inspector General of Registration”;

(ii) in sub-phase (2), for the word “Inspector”, alternatively the words “Assistant Inspector General”. [See Uttar Pradesh Act 6 of 1980, sec. 12 (w.r.e.f. 11/21/1979)].

Deduction of TDS under Section 194IA

The Income Tax Act’s Section 194IA prescribes that a purchaser of immovable property that prices more than Rs. 50 lakhs is needed to deduct a TDS at the property even as the purchaser can pay the seller. The TDS rate on the property for this unique deduction is 1% of the overall amount.

TDS Deduction During Property Transactions

TDS on the sale of goods 1% must be deducted if the property tax exceeds Rs. 50 lakh. This TDS must be removed for all transactions after June 1, 2013, if the real estate transaction value exceeds Rs 50 lakh.

You must deduct 1% on property sales if the property tax is more than Rs 50 lakh. This TDS must be removed for all transactions after June 1, 2013, if the property transaction fee exceeds Rs 50 lakh. This is relevant for the sale of all properties, in addition to the sale of Agricultural Land.

Likewise, it is vital to be aware that 1% TDS is relevant if the Seller is a resident of India. If the seller is not a resident of India, i.e. he is an NRI, the TDS rate will change.

a. Process of TDS for Home Buyers

● Go to the TIN NSDL website (www.tin-nsdl.com)

● In ‘TDS on real estate sale’, click on “Online form for furnishing TDS on real estate (Form 26QB).”

● Select the relevant challan as “TDS on Property Sale”.

● Fill the entire shape as relevant.

(The user must also be provided with subsequent registrations by filling in form 26QB)

PAN of the Seller and Buyer

Seller and buyer communication information

Property information

Amount paid/credited and tax filing information

● Submit the completed form to continue. An affirmation screen appears. After confirming, a screen shows two buttons, “Print 26QB Form” and “Send to Bank”. A specific confirmation field is also displayed on the screen. It is beneficial to save this recognition range for future use.

● Click “Print 26QB Form” to print the form. Then click “Send to bank” to make the desired price online via internet banking. Then continue to the pricing webpage via the internet banking of numerous banks. For the list of legal banks, refer to https://onlineservices.tin.egov-nsdl.com/etaxnew/Authorizedbanks.html

● A challan mark may appear on a hit price containing CIN, price information, and the bank’s name through which the electronic payment was made. This mark is proof of payment.

b. Process of TDS for Property Sellers

The Buyer has to pay numerous taxes; however, even when creating a property purchase, the Buyer is inclined to deduct and pay taxes. Section 194IA offers the Buyer’s TDS deduction requirement when purchasing the property.

Also Read: GST in Real Estate: Complete Guide, Latest News & Updates

Income Tax Exemptions for Home Buyers

a. Tax exemption on Home Loan Principal Amount

The home loan principal is part of section 80C of the Income Tax Act. In this section, a character is entitled to tax deductions on the amount paid as compensation for the predominant issue on the home loan. An amount as much as Rs. 1.50 lakhs may be claimed as a tax deduction under Section 80C. 

b. Tax exemption on Home Loan Interest Amount

If a home loan is taken jointly, each borrower can declare the home loan interest deduction up to Rs 2 lakh under Section 24 (b) and the prevailing compensation tax deduction up to Rs 1.5 lakh under Section 80C. This doubles the number of deductions compared to a home loan taken by a single applicant.

Cash component limit during Property Purchase

The use of cash for certain transactions was prohibited, regardless of whether or not the amount involved was less than the limit of 2 lakh rupees that had been established. 

For instance, one is banned from the usage of Rs 20,000 or more in cash for the transfer of immovable property. Additionally, it is forbidden to hand over more than Rs 10,000 in cash to a commercial organization or an expert.

Important Documents to be Maintained for Taxation Enquiries

31 July of the evaluation year following the financial year is commonly the last day to file tax returns for a particular financial year.

This is why the government commonly offers a four-month window to collect all documents such as salary/income details, bank statements, previous tax returns, etc., salary, commercial enterprise earnings, investment earnings, and so on.

Collating all your equipped files is simply a problem. In this article, we can discuss the desired files for filing tax returns in India.

Service tax on Sale of Property

Hence, the 15% service tax on 25% of the total purchase cost is applied below the building ownership. In other words, the 3.75% (25% of 15%) service tax is levied on the overall charge paid for acquiring a property below creation.

Income tax on Inherited Property

Under the Income Tax Act of 1961, no tax is levied on either movable or immovable inherited property. However, the tax could be charged if the brand new owner decides to promote the property.

Income Tax on Rental Income 

A landlord or landlady will not pay taxes on rental earnings if the gross annual value (GAV) of rental earnings is less than Rs 2.5 lakh. However, if there is a higher income than this, then income tax is liable.

Conclusion

At the time of any real estate transaction, there are numerous taxes on the sale of real estate. Some of these property sales taxes are the Buyer’s responsibility and some are the Seller’s responsibility. 

Additionally, some property sale taxes can be levied nationwide, and some property sales taxes can only be levied in individual states.

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Kuheli Raha

A freelance content writer and bookworm. Loves to spread content over social media and writing. Looking for next travel destination.