Legal Terms in Real Estate -Terminologies & Words(D1)
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D. Financial Terms in Real Estate
D1. Property Taxes & Fees
103. Property Tax
Property tax is a recurring tax paid by property owners to the local government or municipality. The amount is usually based on the value of the property and location. It funds public services like roads and schools. Payment is typically required annually.
104. House Tax
House Tax is a type of property tax specific to residential buildings. This tax is levied by the local municipal bodies and is based on the value, size, and location of the house. The funds collected through this tax are used for the maintenance and development of local infrastructure and services within the municipality. Regular payment is often required, and the exact frequency (annually, bi-annually, etc.) can vary based on local regulations.
105. Stamp Duty
Stamp duty is a tax paid to the government on the legal documentation of property transactions (when you buy or transfer property). It is generally a percentage of the property's value. The exact rate varies by location and the property's purpose (residential, commercial, etc.). It ensures the transfer is legally recorded.
106. Property Registration Charges
Registration Charges are the fees paid to the local government to officially register a property under the buyer's name, giving legal ownership to the buyer. The registration charges are determined by the market value of the property, often ranging from 1% to 3%, and can vary from city to city.
107. Land Conversion Fee
Land conversion fees must be paid to the authorities to change the use of a piece of land (either from agriculture to residential or from residential to commercial use). The exact charges depend on the nature, location, and area of the property, and it can differ from state to state. For example, in Karnataka, a fixed amount of ₹327, ₹218, or ₹89 will be charged depending on the location of the land (i.e., 12km within City Corporation Limits, Taluk Centre, or rural areas respectively); 3% of the land value if charged in Andhra Pradesh, 10% of the land value in Bihar, ₹60 per sq yard to ₹200 per sq yard in Rajasthan, etc.
108. Goods and Services Tax (GST) in Real Estate
A value-added tax in India on the sale of goods and services. For real estate, it applies to under-construction properties but not on completed or resale properties. Rates can vary based on the type of property.
109. TDS on Property Sale
1% of the property value is deducted as TDS (Tax Deducted at Source) on sale of a property, if the property value is greater than ₹50 Lakh. Under Section 194-IA of the Income Tax Act, the buyer is responsible for deducting this tax from the amount payable to the seller and pays it to the government. This is a way to ensure tax collection at the source of the transaction.
110. Capital Gains Tax
Capital gains tax is a tax that needs to be made on the profit received from selling a property (as it is considered an income). The tax paid on capital gains can be long-term or short-term, and the tax levied can range from 10-15%. If held longer, it may qualify for tax benefits.
111. Appraisal Fee
Appraisal Fee is a one-time fee paid to a professional who assesses the value of a property. This appraisal helps lenders decide how much a home is worth and how much they are eligible or willing to loan.
112. Annuity
When selling a property or home through life annuity, the owner receives the purchase price of a property in monthly instalments (pension), typically for the rest of their life.
113. Maintenance Fee
A periodic charge that homeowners must pay, especially in multi-unit complexes, for the upkeep of common areas, security, etc. the builder is typically responsible for paying the maintenance fees until the buyer takes possession of the property.
114. Brokerage Fees
When a real estate broker (or agent) helps a seller and buyer get in touch with each other and they decide to complete the real estate transaction, a percentage of the transaction or property value is paid to the broker or brokerage firm by both parties. Brokerage fees generally depend on the price of the property and can range from 0.5% to 2% in major tier-1 cities and can go up to 6% in tier-2 and tier-3 cities.
Courtesy: ASSURE SHIFT
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