RENTAL INCOME ON PROPERTY INVESTMENT


THE RENTAL INCOME FROM THE INVESTMENT IN PROPERTIES (BUILDINGS-CONSTRUCTED) IN BANGALORE IS AS UNDER:

RESIDENTIAL: 2% TO 6% ANNUAL RETURNS.

COMMERCIAL:1% TO 10% ANNUAL RETURNS.

INDUSTRIAL: 1% TO 4% ANNUAL RETURNS.

THE RETURNS ARE ON AN FIVE YEAR AVERAGE, DOES NOT INCLUDE MUNICIPAL TAXES, EXPENSES TOWARDS REPAIRS AND MAINTENANCE, SERVICE TAX AND INCOME TAX.

BUT, THE APPRECIATION IN THE ASSET VALUE ON THE PRESENT MARKET TREND (AVERAGE FOR THE LAST 5 YEARS) IS 1% TO 10% IN RESIDENTIAL, 1% TO 10% IN COMMERCIAL AND 1% TO 4% IN INDUSTRIAL PLOTS, RESPECTIVELY.

REAL ESTATE REGULATION – A REALITY


THE CABINET ON TUESDAY CLEARED THE MOST SOUGHT AFTER REAL ESTATE(REGULATION AND DEVELOPMENT) BILL 2013, SEEK TO SET UP THE REGULATOR IN EVERY STATE TO PROTECT THE INTERESTS OF THE BUYERS AND TO ENSURE FAIR PRACTICES IN THIS SECTOR.

REGISTRATION EXPENSES MAY GO UP SOON FOR PROPERTIES IN KARNATAKA


THE STATE GOVERNMENT MAY REVISE THE GUIDELINE VALUES OF THE PROPERTIES AND MIGHT INCREASE THE STAMP DUTY ON THE REGISTRATION OF PROPERTIES IN KARNATAKA, VERY SOON.

The all new – The land Acquisition, Rehabilitation and Resettlement Bill 2011


The Land Acquisition, Rehabilitation and Resettlement Bill 2011, seeks to strengthen the rights of landowners during acquisition of land for development and ensure proper rehabilitation and compensation for those being displaced. It also seeks to address problems of industry when land is acquired for setting up projects.

The Land Acquisition Bill will finally be tabled in Parliament in the second half of the Budget Session beginning on Monday. In an all party meeting, there was a consensus among them and have agreed to keep the land mafia out and have agreed to veto the bill in the forthcoming session with modifications.

1). The bill allows the states to enact/amend their own law to suit the state`s needs.

2). 50% of the compensation must be paid to the original land owner.

3). Land can be leased to the industrialists/developers on long term basis, thus retaining the ownership with the original land owners or farmers, so that they will get the regular income.

4). The compensation must be based on the market price and is payable to the farmer.

5). 80% of the people, whose lands are proposed to be acquired for a project must accept and give up their land.

The bill has had a roller-coaster journey already and looks very different now from what had been sent by Parliament to a standing committee last year. Ministries insisted on changes to provisions which were perceived as hurdles to investment and industry, which has said that the terms of compensation and rehabilitation that the bill provides for are very steep.

WHY SCRUTINY AND EXAMINATION OF PROPERTY DOCUMENTS AND VERIFICATION OF THE TITLES REQURIED?


It is advised to conduct a thorough scrutiny/examination of the property documents, licenses, approvals, katha and related clearances from an expert advocate, before entering into an agreement of sale.

The Sale Agreement and The Sale Deed are very important documents, which must be drafted with utmost care and all relevant details regarding the acquisition of the property, flow of titles, approvals, consideration, conditions and clauses must be incorporated as per the prevailing and enforceable laws.

The entire exercise of this examination is to ensure that the titles are in order and also to avoid the futuristic litigation.  But, this process, if diligently conducted, will provide a picture of the property titles, whereupon the purchaser can decide either to buy or to withdraw from the purchase, based on the report or opinion.

The Advocate cannot/might not promise or assure that there will not be any future issues or litigation. 

The Advocate  can study, scrutinise and examine the documents submitted and explanations given/provided by the seller and REPORT HIS VIEWS OR FINDINGS to the purchaser.  Based on such a report/view/opinion, the purchaser can decide, whether to buy it or not.

This study and examination is intended to avoid buying properties with defective titles or properties with discrepancies.

BUDGET – INTEREST BENEFIT FOR LOWER CATEGORY – TDS FOR HIGHER VALUE HOMES – SERVICE TAX ABATEMENT AT 70% FOR HIGH END APARTMENTS


First Home Buyer will get an additional benefit on Interest limit:

There is an additional deduction available on interest repaid on a loan for a first time house purchase. The benefit has been increased by an additional Rs 1 lakh and this will be over and above the Rs 1.5 lakh limit already available,provided, if the house property price is less than Rs 40 lakh and the loan(availed) is Rs 25 lakh or less. This benefit can be claimed or availed in the next year, if not availed in the first year.

Tax Deducted at Source:

The Finance Minister has proposed 1% TDS for all immovable properties valued over Rs50,00,000/-. The seller of the house property worth Rs 50 lakh or more, will have to ensure a 1% tax deduction at source on the amount of the sale and will have to deposit this with the government. The TDS amount has to be deposited as per the guidelines and obtain a certificate and must be attached or furnished or submitted to the sub-registrar at the time of registration.

Service Tax:

As per the new proposal, The Service Tax for the new apartments(high end) either 2000 Square feet of CARPET AREA or the VALUE IS ABOVE Rs1,00,00,000/-, the abatement is 70%, which was uniform at 75% in the preceding year.

It means that the high end apartments will have to pay additional service tax on 5%.

Details:

 

Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land)

This amendment will take effect from 1st June, 2013.

There is a statutory requirement under section 1 39A of the Income-tax Act read with rule 11 4B of the Income-tax Rules, 1962 to quote Permanent Account Number (PAN) in documents pertaining to purchase or sale of immovable property for value of Rs.5 lakh or more. However, the information furnished to the department in Annual Information Returns by the Registrar or Sub-Registrar indicate that a majority of the purchasers or sellers of immovable properties, valued at Rs.30 lakh or more, during the financial year 2011-12 did not quote or quoted invalid PAN in the documents relating to transfer of the property.

Under the existing provisions of the Income-tax Act, tax is required to be deducted at source on certain specified payments made to residents by way of salary, interest, commission, brokerage, professional services, etc. On transfer of immovable property by a non-resident, tax is required to be deducted at source by the transferee. However, there is no such requirement on transfer of immovable property by a resident except in the case of compulsory acquisition of certain immovable properties. In order to have a reporting mechanism of transactions in the real estate sector and also to collect tax at the earliest point of time, it is proposed to insert a new section 194-IA to provide that every transferee, at the time of making payment or crediting of any sum as consideration for transfer of immovable property (other than agricultural land) to a resident transferor, shall deduct tax, at the rate of 1% of such sum.

In order to reduce the compliance burden on the small taxpayers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakh rupees.

Changes in Service Tax – High end apartments

This will come into effect from March 1, 2013.

Subject: Union Budget 2013: Changes in Service Tax-reg.

The service tax changes in Budget 2013 are largely guided by the objectives to provide a stable tax regime and improve voluntary compliance. The important changes are as follows:

A. Legislative changes

Following changes are being made in the Finance Act, 1994:

C. Abatement

5. The abatement available under S. No 12 of notification 26/2012-ST dated June 20, 2012 for construction of a complex, building, civil structures etc. is being reduced from the existing 75% to 70% for construction other than residential properties having a carpet area up to 2000 sq ft or where the amount charged is less than Rs. 1 crore.

 

TAX BENEFITS OF INVESTMENT IN RESIDENTIAL UNIT

This amendment will take effect from 1st April, 2014

Income tax benefit

A new section 80EE, has been proposed in the Direct Tax, which provides an additional exemption of Up to Rs. 1 lakh against the interest payable.

The proposed new section 80EE seeks to provide that in computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section,

  • interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property.
  • It is further provided that the deduction under the proposed section shall not exceed one lakh rupees
  • and shall be allowed in computing the total income of the individual for the assessment year beginning on 1st April, 2014
  • and in a case where the interest payable for the previous year relevant to the said assessment year is less than one lakh rupees, the balance amount shall be allowed in the assessment year beginning on 1st April, 2015.

It is also provided that the deduction shall be subject to the following conditions:-

(i)  the loan is sanctioned by the financial institution during the period beginning on 1st April, 2013 and ending on 31st March, 2014;

(ii) the amount of loan sanctioned for acquisition of the residential house property does not exceed twenty-five lakh rupees;

(iii)  the value of the residential house property does not exceed forty lakh rupees;

(iv)  the assesse  does not own any residential house property on the date of sanction of the loan.

It is also provided that where a deduction under this section is allowed for any assessment year, in respect of interest referred to in sub-section (1), deduction shall not be allowed in respect of such interest under any other provisions of the Income-tax Act for the same or any other assessment year.

It is also proposed to define the term “financial institution”.

This amendment will take effect from 1st April, 2014 and accordingly apply in relation to the assessment year 2014-15 and subsequent assessment year.

 

URBAN PROPERTY OWNERSHIP RECORD – PROPERTY ID IN BANGALORE


THE NOVEL SCHEME INITIATED BY THE REVENUE DEPARTMENT TO PROVIDE IDENTIFICATION RECORDS HAS SOME NOVEL PROCEDURES.

1). THE DEPARTMENT WILL ISSUE NOTICE TO THE PROPERTY OWNER TO PRODUCE ALL THE RELEVANT DOCUMENTS TO THE PROPERTY.

(50% does not have proper records and 75% of the buildings have abnormal violaion or deviation or not constructed as per sanctioned building plan. 75% of the commercial buildings does not have OCCUPANCY CERTIFICATE)

2). THE RECORDS WILL BE VERIFIED.

(tooooooooooooo mmmmmmmmmany defects and discrepancy will be found)

3). THE DETAILS WILL BE PLACED FOR VERIFICATION/INSPECTION(PUBLIC) AND INVITE OBJECTIONS OR COMMENTS OR AMENDMENT OR OMISSION REGARDING THE PROPERTY DETAILS.

4). A NOMINAL VERIFICATION OR THE PROCESS FEE WILL BE CHARGED.

5). UPOR IS ISSUED.