F.A.Qs

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BUYING PROPERTY


Q : What is the difference between built up area, super built up area, and carpet area?
A : Carpet Area: This is the area of the apartment/building which does not include the area of the walls. Built up Area: This includes the area of the walls also Super Built up Area: This includes the built up area alongwith the area under common spaces such as the lobby, lifts, stairs, etc. This term is therefore only applicable in the case of multi-dwelling units.

Q : Who is liable to pay Stamp Duty-the buyer or the seller?
A : The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary. Section 30, of Bombay Stamp Act, 1958 states the liability for payment of stamp duty.

Q : In whose name are the stamps required to be purchased ?
A : The stamps are required to be purchased in the name of any one of the executors to the Instrument.

Q : What is meant by the market value of the property and is Stamp Duty payable on the market value of the property or on consideration as stated in the agreement ?
A : Market value means the price at which a property could be bought in the open market on the date of execution of such instrument. The Stamp Duty is payable on the agreement value of the property or the market value which ever is higher.

Q : Which are the instruments that attract the payment of Stamp Duty ?
A : The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.

Q : Who is the appropriate authority for knowing the market value of the property ?
A : The Sub-Registrar of the area, in whose jurisdiction the property is located, is the appropriate authority for knowing the market value of the property.

Q : What exactly do we mean by a Free Hold flat? What are the advantages and disadvantages, if any ?
A : A freehold property (plot or a flat) is one where there is a whole and sole owner(s), ownership is full and unconditional (within the provisions of the laws of the land) and there is no lessor / lessee involved.

Q : A flat in a Co-op Hsg. Society is to be gifted. What are the legal formalities? What about stamp duty ?
A : Gift of an immovable property is considered as a "transfer" under the provisions of the TOP Act and you have to have the transaction registered through a Gift Deed and pay stamp duty as per provisions of the relevant stamp act depending in which state the property is situated.

Q : Upon buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the genunity of the builder ?
A : When you are buying a flat from a builder in a building under construction, you have to check the following:
  • Approved plan of the building along with the number of floors.
  • Ensure that the floor that you are buying is approved.
  • Check if the land on which the builder is building is his or he has undertaken an agreement with a landlord. If so, check the title of the land ownership with the help of an advocate.
  • Check the building byelaws as applicable in that area and ensure that the builder is building without any violation of front setback, side setbacks, height, etc.
  • Check specifications given in the agreement to sell of the sale brochure. Is he providing the same actually on the ground or not?
  • Check the reputation of the builder.
  • Ensure that urban land ceiling NOC (if applicable) has been obtained or not.
  • NOC from water and electricity authorities also have to be obtained.
  • NOC from lift authorities.




TAX RELATED MATTERS


Q : Does the Indian Income Tax Act offers any special incentive for purchase of residential property by obtaining finance either from banks or other financial institutions ?
A : Under Section 88 of the income tax you can claim benefit for the principle repayment, interest on loan is deductible u/s 24 from income from House Property.

Q : Whether the benefits attached to a residential property are also available to a commercial property ?
A : No such benefits are not available for commercial Properties.

Q : What are the formalities specified under the Indian Income Tax Law, if any, that one has to complete before or after selling any house property, commercial or residential ?
A : You have to obtain Permission u/s 230A of the Income Tax Act if the value of the property to be sold is more than 5 lakh.

Q : Whether incidental charges like brokerage, registration fees, stamp duty and other charges arising out of sale of house property deductable from profit arising on sale ?
A : These expenses are allowable expenses from the full value of consideration of the sale of house property.

Q : Is there any way by which I can claim exemption from tax on capital gain ?
A : The Income Tax act has made provision u/s 54 & 54A--G of the act whereby you can claim exemption from tax on capital gains.
Sec. 54: Purchase or construct another residential house worth the amount of capital gains. Sec. 54 protects capital gains arising out of sale (or transfer) of a residential house whether self-occupied or not, provided the assessee has purchased within 1 year before or 2 years after the date of sale of the original asset or has constructed within 3 years after that date, a residential house. The only condition is that the newly-acquired property should not be sold within 3 years from the date of its purchase or construction. If this condition is not satisfied, the cost of the new asset is to be reduced by the amount of long-term capital gains exempted from tax on the original asset and the difference between its sale price and the reduced cost will be chargeable as short-term (yes, short-term!) capital gain earned during the year in which the new asset is sold. This condition is unfair. One of my readers, Capt. Shelar, had sold a house situated in a main city and purchased a more spacious house in the suburbs. After moving in he found that one of the neighbours is a goonda and another is running a brothel. He desired to shift in a hurry but alas! He found himself trapped. Sec. 54EA & 54EB: Invest within 6 months the amount of capital gains in avenues covered by Sec. 54EB which locks in the funds for 7 years or invest the of sale proceeds in avenues covered by Sec. 54EA which locks in the funds for 3 years. Sometimes the same avenue also attracts tax rebate u/s 88. However, if the assessee has availed of the Sec. 54EA/EB exemption from capital gains by contributing a certain amount, the rebate u/s 88 will not be allowed on the same amount and vice versa.