What Are The Government Taxes on Property Purchase in Mumbai

Purchasing a property is a significant investment, and it’s crucial to understand the various government taxes involved in the process. When buying a property in Mumbai, homebuyers need to be aware of several taxes, including Stamp Duty, Registration Charges, and GST. Each of these taxes plays a vital role in the property transaction and can significantly impact the overall cost of the property. In this blog, we’ll delve into these taxes in detail, providing a comprehensive guide for potential property buyers in Mumbai.

1- Stamp Duty

Stamp Duty is a government tax that homebuyers must pay at the time of property registration. This tax is essential for getting the property registered in the buyer’s name. The amount of stamp duty can vary depending on the location, and as of now, the rate is 5% in several key areas, including:

• Mumbai (BMC): 5%
• Thane (TMC): 5%
• Navi Mumbai: 5%
• KDMC: 5%
• VVMC: 5%
• Pune: 5%

The Overall Stamp Duty Structure is as follows:

1- Local Body Tax (LBT)

Image: NMCutilities

Local Body Tax (LBT) is an additional tax levied by the municipal corporation during the property registration process. In Maharashtra, LBT is 1% of the property value, except in Mumbai (BMC) where it is not applicable. This tax is paid along with the stamp duty to the government.

2- Metro Cess

Metro Cess is a tax imposed by the government to fund transport infrastructure projects like metros, bridges, and flyovers within the state. The Metro Cess is set at 1% of the property value and is paid alongside the stamp duty.

Registration Charges

Image: Bank Bazar

Registration Charges are fees levied by the government to record the property details in official records. This fee is either 1% of the agreement value or ₹30,000, whichever is lower. Essentially, it translates to 1% for agreement values less than ₹30 lakhs and ₹30,000 for agreement values more than ₹30 lakhs.

Difference Between Stamp Duty and Registration Charges

While the Stamp Duty is a tax imposed to register the property under the buyer’s name, Registration Charges are the fees incurred to record the property details. Both are essential but serve different purposes in the property registration process.

Goods and Services Tax (GST)

Image: MyGate

GST (Goods and Services Tax) is applicable on the agreement value when purchasing an under-construction property. It is not applicable to ready-to-move-in properties or projects that have received an Occupancy Certificate (OC).

• 1% GST for affordable projects with an agreement value of less than ₹45 lakhs.
• 5% GST for other projects with an agreement value of more than ₹45 lakhs.

How These Government Taxes Are Paid

1) Stamp Duty and Registration (SDR)

Both stamp duty and registration charges must be paid directly to the government within 45 to 60 days of booking the property, provided the builder has all the necessary sanctions. This process is usually handled by a separate agency hired by the developer. Buyers also need to pay an extra charge ranging from ₹5,000 to ₹15,000 to the agency for handling the registration process.

The builder’s CRM department typically sends a mail to the buyers stating the stamp duty amounts along with the agency’s account details. The agency then pays the amount to the government on behalf of the buyers through the government site.

If the buyer is taking a loan, they must have a sanction letter from the bank before paying the SDR. This letter assures the builder that the remaining payments (about 80% to 90%) will be received from the bank. Without this letter, if the desired sanction amount is not granted, the builder might face issues as the property is already registered in the buyer’s name.

2) GST

Unlike SDR, where the complete amount is paid at once within 60 days, GST is paid in installments as per the construction progress (slab-wise). This means buyers need to pay GST on the amount paid to the builder at each stage of construction.

Example:

If the agreement value is ₹50 lakhs and the buyer pays a booking amount of ₹1 lakh, then ₹5,000 needs to be paid as GST on ₹1 lakh. Subsequently, if the bank pays the builder ₹5 lakhs, the buyer needs to pay 5% GST on that amount, i.e., ₹25,000. This process continues until the possession of the property.

Detailed Example: Calculating Taxes on Property Purchase in Mumbai

Let’s suppose you’re purchasing a 2 BHK flat costing ₹50 lakhs in Mumbai. Here’s how the taxes break down:

• Stamp Duty (6%): ₹3 lakhs
• Registration: ₹30,000 (1% or ₹30,000, whichever is lower)
• GST (5%): ₹2.5 lakhs

Thus, the total stamp duty and registration charges of ₹3.30 lakhs must be paid within 2 months. The GST of ₹2.5 lakhs will be paid in installments as per the construction progress.

Payment Scenario:

If only 30% of the work is done, and the client gives a token amount of ₹1 lakh:

• GST on ₹1 lakh: ₹5,000
• Remaining payment: ₹14 lakhs
• GST on ₹14 lakhs: ₹70,000

The client/bank will continue to pay the GST on every payment made to the builder until possession.

Demo Quotation for a 1 BHK Flat (450 sq ft)

Floor Rise Charges:

• 1st to 7th Floor: ₹0
• 8th to 15th Floor: ₹2 lakhs
• 16th to 22nd Floor: ₹4 lakhs

Breakdown:

• Basic Flat Cost: ₹48,00,000
• Floor Rise: ₹2,00,000
• Agreement Value (AV): ₹50,00,000
• Stamp Duty (6%): ₹3,00,000
• Registration (1% of AV or ₹30,000, whichever is less): ₹30,000
• GST (5%): ₹2,50,000
• Total: ₹57,80,000

Considering a 90% loan and 10% downpayment with 30% current due:

• Downpayment (10%): ₹5,00,000
• Stamp Duty (6%): ₹3,00,000
• Registration: ₹30,000
• GST on Due (5% on 30%): ₹75,000
• Total Own Contribution: ₹9,05,000
• Home Loan Amount (90%): ₹45,00,000
• First Disbursement: ₹15,00,000
• Customer Down Payment: ₹5,00,000
• First Disbursement by Bank (20%): ₹10,00,000
• Pre-EMI (10 lakhs 7%): ₹7,000 (increasing with construction progress)

Process Of Payment :

• Go to the official website of the Maharashtra Government Department of Registration and Stamps.

• If you have already registered, log in using the existing credentials.

• If you have not registered, choose the option of ‘Pay without Registration
• After this, you will be redirected to a different page. Select the option of ‘Citizen’ and then click on the type of transaction for proceeding.

• Select ‘Make Payment to Register Your Document.’ Fill in all the details correctly and pay your registration and stamp duty charges.
• Select the option of payment and keep the challan handy for the future. When you are in the process of executing the instruments, this challan will be required.

At Housiey, we understand the complexities involved in purchasing a property. Our team is dedicated to guiding you through every step of the process, ensuring you are well-informed about the various taxes and charges. Whether you’re looking to buy a home in Mumbai, Pune, or any other city, we are here to help you make a smart investment. Visit our website for more information and to explore the best properties that suit your needs.

Frequently Asked Questions (FAQs)

1. What are the main taxes on property purchases in Mumbai?

• The main taxes include Stamp Duty, Registration Charges, and GST.

2. How is Stamp Duty different from Registration Charges?

• Stamp Duty is a tax for registering the property in the buyer’s name, while Registration Charges are fees for recording the property details.

3. Is GST applicable on ready-to-move-in properties?

• No, GST is only applicable on under-construction properties.

4. What is the current Stamp Duty rate in Mumbai?

• The Stamp Duty rate in Mumbai is 5%.

5. When do I need to pay these taxes?

• Stamp Duty and Registration Charges must be paid within 45 to 60 days of booking, while GST is paid in installments as per construction progress.

Feel free to check out our other informative articles, such as the difference between carpet area, built-up area, and super built-up area, to enhance your knowledge and make informed decisions.