Real estate is subject to various legal taxes, including:
1. Property Tax: This tax is levied by the local government on the value of the property and is usually a percentage of the assessed value. Property taxes fund local services such as schools, police, and fire departments.
2. Stamp Duty: This tax is levied by the state government at the time of property purchase and is usually a percentage of the property's sale value. It is paid by the buyer and is used to cover the cost of legal documents related to the purchase.
3. Capital Gains Tax: This tax is levied on the profit earned from the sale of a property. It is calculated by subtracting the sale price from the purchase price and applying the relevant tax rate. In India, the capital gains tax rate for long-term gains is 20% (if the property has been held for more than 2 years) and for short-term gains, it is calculated as per the slab rate of the individual.
4. Goods and Services Tax (GST): GST is a national tax levied on the sale of goods and services in India. For real estate, GST is charged on the construction of under-construction properties, while completed properties are exempt from GST.
5. TDS on Property: If the value of the property is above a certain threshold, the buyer is required to deduct tax at source (TDS) at the time of property purchase. The TDS rate is usually 1% of the property's sale value.
It's important to understand and comply with all applicable legal taxes when buying or selling real estate. Working with a professional such as a lawyer or tax advisor can help ensure compliance and avoid any legal or financial complications.