What are the taxation formalities I need to complete while purchasing a property?

From the point of view of taxation no special formalities are required for completing while buying the property. However, proper Agreement to Sale etc. must be done and the ownership and the title should be verified to ensure that one does not have a problem at a later stage in respect of such property.

 

Sale of residential accommodation may result in a short term capital gain/loss if sold within a period of 3 years or a long term capital gain/loss if sold after a period of 3 years from the date of acquisition (Section 29A, 42A and 47).

b) A short term capital gain/loss will be treated and taxed in the same manner as any other income/ loss.

c) Tax on long term capital gain can be avoided if the sale relates to a property other than one residential accommodation and reinvested in any residential property within a period of 1 year before or 2 years after the date of transfer (Section 54 F).

d) Long term capital gain can also be saved if only the capital gains (and not the total sale proceeds) is invested for a period of 3 years in specific Bonds of National Highways Authority of India or Rural Electrification Corporation Limited (Section 54 EC).

e) Determination of sale proceeds of a Property will be on the valuation adopted by the State Stamp Duty and Registration Authorities and not the amount mentioned in the Deed of Conveyance (Section 50C). This is intended to cover cases where part of the sale price is received by the seller in unaccounted cash.

f) In the absence of either freezing the capital gain in specified securities or reinvested as per clauses (d) and © as above Income Tax is payable @ 20% by the seller on the capital gains computed by deducting from the Sale proceeds the cost of acquisition as increased by cost of living index (Section 112 and Section 55).
 

How can I calculate the income from house property?

The systems of calculating income from house property broadly speaking would be as under:

Choosing the floating rate of interest or not depends upon the perception of the client. Personally I would feel that fixed rate is good so that I am aware of my liability for interest in years to come and when the interest rates are lower on housing then also it is better to think of a fixed rate. However, as the situation stands as on today I feel that the interest on loan taken should be floating rate of interest because correction is expected in the interest in the coming period.

 

 

For the purpose of Real Estate the Long-term Capital gain would be only if you hold the property for more than three years, then it is subjected to tax @20% only. In case you sell the property in less than three years time then it would become short-term Capital Gain and the same is required to be taxed at the prevailing tax schedule of the rate applicable to the assessee depending on his other incomes.

 

Interest paid during the construction period would enjoy tax benefit in total five years as per s.24 of the I.T. Act, 1961. The Loan processing fee, the brokerage, the stamp duty can be added to the cost of the property. The misc. expenses if they can be attributed directly to the purchase of the property then they would form part of the cost of the property.