IT Department Wants Its Share from Owners of Redeveloped Property in Mumbai

The redevelopment of property in Mumbai has enriched 6 societies that lie in Bandra East. Each of the flat owners who handed over his apartment for redevelopment has received at least fifty lakh rupees from a builder and upon completion of the redevelopment project, will receive a larger flat free of cost.

The Income Tax Department’s Share

Despite the middle-income society having handed over their current flats for redevelopment to builders, the IT department wants its share of the windfall from flat owners. Each of the 6 societies received between 30 to 200 crores from a builder and each flat owner received between 50 lakhs and 1 crore from a builder as well. The IT department has issued notices to the housing societies and to individual homeowners.

Flat owners have been granted some respite as they challenged the IT Department and received a favourable ruling from the Income Tax Tribunal in one case. The flat owners also received a stay order from the High Court in another case. Notably, the Bandra Middle Income Group redevelopment project is the largest in Mumbai today.

Is This Double Taxation?

A representative of the Bandra residents has stated that because residents of the societies have already settled their dues with the IT department, the IT Department, by demanding that taxes be paid on the current windfall, is taxing residents twice. They have stated the IT Department is first taxing the society and then the individual members of the society which amounts to double taxation.   

In the case of the Middle Income Group Housing Society Number 4, the IT Department demanded that it was owed taxes, including interest and penalty, amounting to 73 crore rupees. The 168 members of this housing society were paid between 62 to 80 lakh rupees each by the builder. All 168 members of this housing society now reside in a new tower.  

A member of Group Housing Society Number 4 has stated that the society has challenged the notice of the IT Department before the Commissioner of IT. The member has stated before the Commissioner of IT that the society did not, in fact, receive the sum from the builder. According to the member, the society was only the custodian and it only negotiated on behalf of the members of the society.

You Win Some, You Lose Some

In the case of Group Housing Society Number 4; it was paid by one of the builders in Mumbai and the IT notice states that under the cooperative society rules the compensation they received would be used for the betterment of the society. However, because the money received by the society was profit that was distributed among the members of the society, it fell outside the purview of the rules of the corporative society and was taxable because the individual members received a share of the profit. Hence the society was taxable.

Another society won its case. Each member of the society received 53.5 lakh and the IT department demanded 33 crores from the society, however, the IT tribunal ruled that once members of the society have already received the income in their hands, the same income in the hands of a society cannot be taxed again. Notably, glancing at a list of those participating in the redevelopment projects one finds that the list of builders in Mumbai active in such projects consists of names of that are less well known.

Major Bank Eases Lending Rate for Builders and Developers in Kolkata

As though what has already been done wasn’t enough, now builders and developers in Kolkata along with builders across India are eligible for a thirty-five basis point reduction in construction loans if they apply for such a loan from the public sector’s State Bank of India. The loans in question shall only be made available to builders for the construction of affordable houses.

The State Bank of India is the largest mortgage lender in the country and it hopes to remain so for the foreseeable future. SBI has already has a blitzkrieg campaign to market its home loans to as many borrowers as possible. By offering loans to builders for construction at lower rates than before the SBI is ensuring its dominance as a lender in the real estate sphere. It’s likely that the stated purpose of the thirty-five basis point loan concession to builders is to attract homebuyers who purchase a property in Kolkata or elsewhere in India. By attracting such homebuyers, SBI will retain a comfortable lead over others banks with respect to the number of loans it creates.

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 Additional Benefits for Women

Women who take a loan from the SBI shall have to pay a 5 basis points lower rate of interest than that paid by a salaried man. A 5 basis point translates into a .05 percent lower interest rate. While salaried men will be charged interest at a rate of 8.40 percent every year, women shall be charged interest at the rate of 8.35 percent but only for a loan up to thirty lakh rupees.

When Banks Compete, Consumers Win

News following the announcement by the SBI led other large Indian banks to also offer loans at similar rates. This is good news for borrowers as they not only enjoy advantages when borrowing from banks but also find it more affordable to buy a house because builders are also finding it easier to finance projects. Many of the largest banks in India are making a deliberate push to attract customers for home loans. The governments’ initiative to provide thirty million new affordable housing units in urban areas is likely to have a multiplier effect in different sectors of the economy including in Banking.

Conclusion

The goal to provide housing for all Indians by the seventy-fifth year of the country’s independence is an ambitious yet attainable goal, even more so when public and private banks are willing to offer loans to candidates seeking to finance for a house. The launch of affordable upcoming projects in Kolkata and elsewhere is expected to increase as a result of the lower interest rates being charged by major Indian banks from builders and borrowers.   

Here’s how you can get over your fear of buying the “RIGHT PROPERTY”

Buying property is no child’s play, be it India or any other country across the world. There are certain factors associated with it such as cost, location, loans and what not. However, it should not be that chaotic and buyers should be at ease while making the final decision. Keeping aside all these factors, some of us are still not able to get over the burden of finding that perfect property and call it our own. On top of that, there are also various taxation complexities and return amount on insurance premiums that get associated with the whole idea of buying Real estate property.

In order to overcome the panic, here are a few tips that might come in handy next time you are going for a property check!

Stop expecting quick returns

Almost all of us these days are trying to find a property to buy so that it could act as a security to us. However, we keep forgetting that the prices do not climb overnight; they take few years to reach a certain threshold where it can start giving out profits. Therefore, if you are planning to take the leap then you should have a certain perspective about the investment that needs a time frame of five years or more.

It’s never the right time

If you are one of those people who expect for the prices to drop suddenly so that you can buy a property on your own terms, then it’s time to think twice. Also, it’s time you should also stop waiting to get more discounts from developers. This helps you to get a clear idea of when you should start investing your money on the property that suits you best. The realty sector is always going to be unpredictable, so it’s best for you to stop worrying and make the most out of different opportunities.

Apart from these factors, there is also a fear among buyers about the right credentials and property papers. In order to make sure that no one falls into a trap of fraud realtor, some of the laws have been introduced by the government. On the other hand, if you are too cautious to use a legal help, it always pays off to be a little alert while finalizing a property. A harmless background check and track record of the developer should be enough to start with.

As mentioned earlier, getting into becoming a real estate owner does not mean that you start losing your sleep over it. If you want to be sure about the property site just go through a few of the quality check steps and you’re good to go! Although it can be a tricky business, real estate does not necessarily means that one should become pessimistic about it.

In order to help property buyers take the necessary precautions before committing to a realtor, the above mentioned instructions are surely going to come in handy. Therefore, while keeping your expectations realistic, you can actually stumble upon just the exact property that you have always desired for.