The Government of India has been introducing all kinds of new regulations for Income Tax Returns (AY 2019-20), which needs to be filed by 31st July this year. The good news is that most of these reforms have made the filing process more fluid.
For instance, if you are the owner of house property which is under construction, good news awaits you!
In a move that brought a significant amount of relief, the Government has decided to cut down the rates of GST (Goods and Services Tax) for under construction houses.
The taxes have been slashed to an effective rate of 5% and an affordable rate of 1% from the 1st of April 2019. These rates were previously at 12% and 8% effective rates, respectively. So if you’re looking to buy property this year, remember the following key points:
The first point to tackle is how much GST should you be paying?
Well, if the property in question has been launched after the 1st of April, 2019, the new – and lower – tax rates will be applicable.
It’s important to note here that the rates can be applied on the price and that the builder will not be able to claim rebate for services or the raw materials already used. O
n the other hand, for those properties which have been under construction prior to 31st of March, 2019, home buyers and builders can select either the present, lower rate – without input tax credits – or the previous rate of 12% for premium homes and 8% for affordable ones, but with the additional benefit of input tax credits.
The major advantage of input tax credit is that taxes which have been previously paid on equipment, services and materials will not be taxed again. Additionally, the builder can also claim a rebate on the same.
- A house which is priced under Rs.45 lakhs is referred to as an affordable house and will be eligible for a 1% concessional tax rate. The definition of an affordable house, however, is also dependent on the carpet area (60sq.m. in metro cities and 90sq.m. in non-metro cities) and the location of the house. Those properties which meet the criteria are eligible to receive a 1% concessional rate.
- Another common question is, how do we know whether the house in question falls under the new rates or the old one? Well we can say that if you own property where the work started before the 31st of March, but the completion certificate or first occupancy did not occur before this date, it is deemed as an ‘under-construction’ property. The choice of whether you wish to pay taxes as per the new rates or the old rates is finally left up to you!
- When it comes to shops and offices located within residential real estate projects, the choice is between 5% GST rate with no input credit tax and 12% with input credit tax – in cases of projects which were already under construction, as on or before the 1st April, 2019. Once again in order for these rates to apply, the carpet area of the property should not be more than 15% of the total area of carpet for all flats constructed in the project.
- Finally, if you have payments for under construction flats which need to be cleared after the 31st of March, 2019, the new tax rates will apply to the remaining of the payments. The builder can however, choose to go with the earlier rates and then share the benefits of tax rebate with the consumers!
In conclusion we can say that the new GST rates introduced for under construction property are definitely a relief to many homeowners, who have been plagued with high tax rates since the introduction of GST.
Such reforms with emphasis on the taxpayers show progress made by the Government and the IT Department.
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