Buyers Guide

Stamp Duty & Registration

As per Maharashtra stamp act,1958, the purchaser must pay a 5% stamp duty on the purchase of any flat within the jurisdicary limits of Municipal corporation act of greater as a grmapanchayat law. Without the payment of this stamp duty, your solicitor will not be able to officially register your new house in your name, even when the house is transferred within the family.

The rate of stamp duty for shops/galas/office premises and garage even if just used for car parking is 5% in Mumbai.

Using your own funds

If the house is being acquired out of the sales proceeds of an earlier house, the exemption from the long-term capital gain tax on the sale of the earlier house can be claimed under U /s. 54. To claim this benefit, the new property should be acquired one year prior to selling or two years after the date on which the transfer of the earlier house takes place.

If the new house could not be acquired within a period of one year from the sale of the earlier house, the sales proceeds should be deposited in a bank or institution, which runs Capital Gain Accounts Scheme approved for this purpose.

Other issues also need to be considered like if the person acquiring a house already holds another house, then every year, one of the two house property would be deemed to be let out (u/s. 24) of income tax Act and the let-out value shall be treated as income. Hence, appropriate tax planning should be considered.

Further, in the case of individual or HUF (Hindu Undivided Family), exemption is provided from long term capital gain tax u/s. 54F on sale of any long term capital asset, if sale proceeds are invested in acquiring a house within prescribed period. So, a house can be acquired to save on long term capital gain on sale of long term capital assets.

Finance

Home loans While taking a housing loan, the following issues need to be considered.

Bank or financial institution offering loan: It is generally safe to take a loan from one of the leading financial institutions.

Rate of Interest: The rate of interest on housing loans keeps changing constantly. It depends on the tenure of the loan, fixed/floating rate, credit profile of the borrower etc.

Fixed/floating: You can either opt for a fixed or floating rate of interest. The fixed rate is generally 50-75 basis points higher than the floating rate. The floating rate is linked to the PLR of the lending institution.

Processing fees: A processing fee is charged by financial institutions/ banks for verifying the title report, financial performance, valuation of flat and so on, and for processing the loan application. This fee can be up to 1% of the loan amount. During special periods like property exhibitions, or other events, banks and financial institutions offer special interest rates and waive/ offer concessions in processing fees, so buyers can benefit from such offers.

Legal

As an NRI, you need no permissions to buy property in India. You can also rent out the property and repatriate your rental proceeds, subject to payment of taxes.

Please remember that an NRI who is an Indian Citizen can sell his Immovable Property (other than agricultural or plantation property or farmhouse) to another NRI. However, the transaction has to be routed through India only. In other words, the buyer has to invest in India by way of remittance from abroad through normal banking channels or by debit to his account maintained with an authorized dealer.

The sale proceeds of the property must be credited to your bank accounts maintained with an authorized dealer in India.