Understanding Real Estate Taxes While Buying or Selling a Property in Gurgaon

Investing in real estate in Gurgaon, one of India's fastest-growing metropolitan areas, is a lucrative prospect. However, whether you are buying or selling property, understanding the various taxes involved is crucial to ensure compliance and optimize costs. There are many more costs to it than just the base price, and it can mess up your budget. In this blog, we will break down the key real estate taxes applicable in Gurgaon and what you need to know about them.

Taxes on Buying Property in Gurgaon

Stamp Duty and Registration Charges

Stamp duty is a mandatory tax paid in Gurgaon by all investors and buyers and the percentage varies among the gender of the owner. On the other hand, registration charges are the charges for property registration.

Stamp Duty for Male Buyers: 7%

Stamp Duty for Female Buyers: 5%

Joint Ownership (Male and Female Buyer): 6%

Registration Charges: 1% of the property value

Goods and Services Tax (GST)

GST is applicable on the under-construction property but not on the already completed, ready-to-move properties. 

GST on Affordable Housing: 1%

GST on Non-affordable Housing: 5%

GST is not applicable on resale property from an Individual owner.

Property Tax

Once the property is purchased, the owner must pay an annual tax to the Municipal Corporation of Gurgaon (MCG), based on property size, usage, and location.

• Rates vary based on property size and location.

 You have to make the payment online using the MCG portal.

Taxes on Selling Property in Gurgaon

Capital Gain Tax

When selling a property, the seller is liable to pay capital gain tax based on the duration of ownership of the property.

Short-Term Capital Gains (STCG): When the capital gains are on the property with ownership of up to 2 years then the capital gain tax is applied on the owners' income tax slab.

Long-Term Capital Gains (LTCG): When the capital gains are on the property with ownership of more than 2 years, then the tax is 20% with indexation benefits or 12.5% without indexation benefits. 

Exemptions on Long-Term Capital Gains:

• One can get an exemption on LTCG under section 54 of the Income Tax by reinvesting the sale amount in purchasing another property. 

• Under section 54EC of Income Tax, one can get tax exemption by investing in Capital Gain Bonds of up to 50 lacs within 6 months of the property sale.

Tax Deducted at Source

If a property is sold for more than 50 lacs, then the buyer has to deduct 1% TDS and submit it to the government. The seller can then claim the amount by filing the income tax return.

GST on Sale of Property

• If the property is fully constructed or is part of a resale deal, then there will be no GST applicable.

• In the case of selling an under-construction property, a GST of 5 or 12% may apply according to property type, i.e. commercial or residential.

How to Save on Real Estate Taxes in Gurgaon

Choose the Right Timing: Holding a property for more than 2 years can help reduce the capital gain tax and comes with exemptions and benefits.

Utilize Exemption Benefits: Re-investing in another property with the sale amount or investigation in capital gain bonds can help reduce the long-term capital gain taxes.

Documentation Benefits: The stamp duty for women is 2% less than for men, and the GST on affordable housing is 4% less than for non-affordable housing.

Conclusion

Real estate investment in Gurgaon has become a trend as well as a smart investment move with constant growth and infrastructure development. These investments come with various tax implications for both buyers and sellers. Understanding these taxes and planning strategically can help in making cost-effective and compliant property transactions. Consulting a tax expert or real estate professional can further streamline the process and maximize benefits.