This article discusses key checkpoints for first-time property buyers with a focus on Income Tax, GST, and RERA compliance. Understanding these regulations will help you make informed decisions and avoid common pitfalls during the property-buying process.

Points to Check Before Buying Property: Income Tax, GST, and RERA Perspectives

Buying property for the first time can be both exciting and challenging. Ensuring compliance with key regulations under Income Tax, Goods and Services Tax (GST), and Real Estate Regulatory Authority (RERA) is crucial. Here’s a detailed guide outlining important checkpoints for first-time buyers.

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1. Income Tax Considerations

• Source of Funds - The Income Tax Department scrutinizes the sources of funds used for property purchases. Ensure all funds are accounted for, declared, and legitimate, aligning with your declared income.
• TDS on Property - Under Section 194-IA of the Income Tax Act, a buyer must deduct TDS at 1% if the property value exceeds INR 50 lakhs. This TDS must be deposited with the government within 30 days from the deduction date.
• Tax Benefits on Home Loans - Section 24(b) provides deductions on interest paid on home loans up to INR 2 lakhs annually. Additionally, Section 80C allows deductions for principal repayment up to INR 1.5 lakhs per annum, bearing in mind that its under old income tax regime.
• Property Valuation in Line with Stamp Duty Value - Under Section 56(2)(x) of the Income Tax Act, the declared value of the property should ideally match or exceed the stamp duty value assessed by the government. If the property's transaction value is significantly lower (i.e. more than 10%) than the stamp duty value, the difference could be treated as deemed income in the hands of the buyer, attracting additional tax liability.

2. GST Considerations

• GST Rates on Property - Residential properties attract GST at a rate of 5% (without Input Tax Credit - ITC) for regular housing projects and 1% for affordable housing projects. Confirm the applicable GST rate clearly with your builder or seller.
• Input Tax Credit (ITC) - Under the current GST structure for residential properties, buyers are generally not eligible for ITC. Ensure your builder clearly states that no ITC benefit is passed on and confirm it in the sale agreement.
• No GST on Ready-to-Move Properties - GST is applicable only on under-construction properties. Verify if the property has obtained the Completion Certificate, as ready-to-move properties with Completion Certificates attract no GST.

3. RERA Considerations

• Verify Project Registration - Ensure the project is registered under RERA, as per Section 3 of the Real Estate (Regulation and Development) Act, 2016. Verify registration details on the official RERA website of your respective state.
• Check Builder’s Track Record - Under RERA, developers must disclose previous project details, litigation history, and financial credibility. Assessing these details will help safeguard your investment.
• Confirm Delivery Schedule - RERA mandates strict adherence to the promised completion schedule. The builder must clearly mention the delivery timeline and provide compensation in case of delays, as stipulated by RERA.
• Check Agreement Terms - Under RERA, builders are required to draft agreements fairly and transparently. Thoroughly review clauses related to carpet area, penalty clauses, payment schedules, and refund policies.

Additional Best Practices for Buyers

• Professional Legal Vetting - Engage qualified professionals to review property documents and agreements.
• Document Verification - Ensure proper verification of property titles, completion certificates, and occupancy certificates.
• Financial Planning - Plan your finances carefully, considering loan eligibility, down payments, EMIs, and associated taxes.

Conclusion

By paying careful attention to Income Tax, GST, and RERA regulations and undertaking comprehensive due diligence, first-time property buyers can safeguard their interests and enjoy a smooth property-buying experience. Staying informed and consulting with experts will further ease the process, ensuring a legally sound and beneficial investment.