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Taxes on flats (property Purchase) – Tamilnadu

The taxation on property purchases (house/flat) has grown its shape and model year after year and presently a purchaser need to pay a sizable amount as government payout while purchasing a house. The following are the models of taxes (central and state) collected on property purchases in Tamilnadu

  1. Agreement registration charges

2% on the value of the flat along with registration fee and expenses. Only after registering the construction agreement only the land registration can be made. The document registration number for the agreement to purchase a flat should be mentioned in the sale deed. This facilitates the flat being allotted by the builder to a customer. There were instances that a builder enters into agreement with more than one buyer for a same flat and in the absence of flat agreement registered for a land purchase it could not be tracked. Further the lawful enforcement can be made with reference to the registered document. However the charges towards registering the flat area is increases the cost of flat.

  1. Land registration charges

8% on the value of land along with other incidental expenses

  1. Service tax

14% on 40% overall value of the house excluding the land cost and government charges. It was introduced for residential units having more than 12 numbers in same building which shares any one common features or amenities among them. However the number was reduced to 2 and above later and the rate of tax was increased from 12.36% to 14% from the year 2015 -16.

  1. Vat

2% on the overall value of the house excluding the land cost and government charges. It is like double taxation for same value. By paying vat as sale of goods one should also pay service tax as sale of service.

  1. Housing loan processing charges

0.25% to 0.5% with minimum of Rs. 5700

  1. Mortgage creation charges

25000 plus incidental expenses. After the housing loan disbursement memorandum of deposit of title deed to be registered with registrar office to create a charge officially on public record. Even though equitable mortgage was created with the banker’s record, this is being done to avoid subsequent sales till the closure of the loan.

The above cost are illustrated as follows

Sl No Category of Expenses Amount
1 Flat cost and other allied expenses like Car parking, Membership, EB, Sewerage Charges, Water Connection Etc. 40,00,000
2 Land Cost for the Flat 20,00,000
Cost of Flat Before Government Payouts 60,00,000
3 Agreement Registration expenses (1 X 2%) + 5000 towards other expenses 85,000
4 Land Registration Expenses (2 X 8%) + 10000 towards other expenses 1,70,000
5 Service Tax (1 X 40% X 14%) 2,24,000
6 VAT (1 X 2%) 80,000
7 Housing Loan Processing Fee (Taken as minimum) 5,700
8 MODT Creation Charges and Incidental expenses 28,000
Total of government payouts 5,92,700
9 Gross cost to the purchaser 65,92,700