In India, almost everyone dreams of having a home. A home where they can build their future and see their kids grow up. But the current state of reality is that only a few people in India get a chance to fulfil their dream. It is because most sellers know about the tax required at the time of selling, but most buyers are unaware or have little knowledge about the tax required at the time of buying a home. Hence, to throw some light on, this blog presents the tax implications involved when buying a home and all the points you need to keep in mind to become a successful buyer.
1. Reporting of high-value transactions by registrars
If the stamp duty value of a home exceeds Rs 30 lakh, registrars and sub-registrars have to report to the income tax department about buying and selling a home. The transaction indicating the purchase of a property worth more than Rs 30 lakh will result in a notice from the Income Tax department.
2. Deduction of TDS under Section 194IA
If you are buying a property whose agreed sale consideration is Rs. 50 lakhs or above, in that scenario, you are required to deduct TDS @ 1% and pay the rest to the seller. Also, it is important to keep in mind that the TDS is deducted from the sale value, not from the home's stamp duty value.
3. Documents required
Some documents might not be required at the time of filing a return of income, but it would be wise if you keep them well maintained so that you can present them at the time of scrutiny.
Be well informed about the circle rate of the property you are interested in buying.
Agreement of Sale
In the event of opting for a loan, keep the loan papers ready.
Quick tips to save on property tax
The government charges 5–7% of property costs in the form of stamp duty and registration taxes. You, as a buyer, can claim tax deductions under Section 80C of the Income Tax Act, 1961. If you easily meet certain conditions, you can claim a tax deduction of up to Rs 1.5 lakhs.
If you are opting for the loan, you can still claim tax deductions under Section 24, 80 C, and 80EE of the Income Tax Act for repayment of principal and interest after fulfilling the below-mentioned conditions.
Under Section 24, as a buyer of a self-occupied property, you can receive a deduction of up to Rs 2 lakhs for the interest portion of the home loan.
Under section 80 EE, if you are a first-time home buyer, you can claim an extra Rs. 50000 in deduction provided the loan amount is Rs. 35 lakhs or less, but the condition is that the property value should not exceed Rs. 50 lakhs.
Tax deductions can help ease the overall financial burden you are going through as a home buyer. We hope you will make a wise financial decision by keeping these points in mind.