[ecis2016.org] Legal and taxation aspects are the two most important factors that can make or break the realty deal
Selling a home requires expertise in several areas for a smooth transaction, without any dispute and to get the proper return on investment. Legal and taxation aspects are the two most important factors that can make or break the realty deal.
You are reading: Know the legal and taxation aspects before you sell a residential property
It is also important to know the entire process of execution of the transaction in clear terms and also have an open discussion with the buyer on who will bear the charges that are incurred during the transaction.
Tax implication of selling a home
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If a property is sold within two years of buying (acquiring) it, any profit from the transaction is treated as a short-term capital gain in the hands of the individual. It is included in the total income of the owner and taxed as per applicable the slab rate.
AS Sivaramakrishnan, Head, Residential Services, India, CBRE South Asia Pvt. Ltd says, “If a house property is sold within five years of the end of the financial year in which it was purchased, the tax benefits claimed are not applicable i.e. tax benefits which were claimed earlier will have to be reversed. The tax deduction claimed for the principal repayment, stamp duty and registration under Sec 80C are reversed and the amount becomes taxable in the year of sale. Only the deduction of the interest payment under Section 24B is left untouched”.
Experts pointed out that It is mandatory for the buyers to deduct TDS of 1% when the property is worth more than 50 lakhs (Form 26QB to be submitted to IT department). The payment has to be made on behalf of the seller and is linked with Permanent Account Number of the seller. The seller must obtain the TDS certificate from the buyer. In case of loss on the sale of the property or claiming exemptions from long term capital gains tax, the seller can claim a refund for TDS on the tax return by providing the relevant details.
The seller can also claim exemption from the long-term capital gains tax if he/she within 6 months of property transfer, invests the capital gains (maximum limit of Rs.50 lakhs) in long term specified bonds as notified by the Govt. Of India (National Highways Authority of India and Rural Electrification Corporation Limited) for a minimum period of 3 years (Section 54 EC)
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Beware of Legal angle while selling a home
Mr. Kalpesh Dave, Head- Corporate Planning & Strategy, Aspire Hoe Finance Corporation Ltd AHFCL listed out, “Following are the key legal points to keep in mind while selling a home:
- It is advisable to enter into an MoU with the buyer at the beginning (though not enforceable) which contains the details of the proposed transactions and the liability of each party. The contents may be drafted by a legal expert
- The sale agreement should be prepared, again with the help of a legal expert and need to be read as well as reviewed thoroughly to avoid any issues / litigation in future
- The sale agreement consists the clause of handover and the same has to be respected in the letter and spirit. Any delay in doing so is termed illegal and is liable for prosecution in the court of law”
One may prepare the document list with the help of an expert (a legal expert or a property consultant) and have the copies of the same being made available so as to show the prospective buyer.
Experts suggest to be cognizant of prevailing market conditions and evaluate if this is the right time to sell your home. Ensure that the house is in good condition, painted etc., as this will provide a better visual appeal.
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Source: https://ecis2016.org
Category: Must Knows
