Legal Corner » Taxation

Can a piece of land be converted to other zonal uses?

atoneplace — Wed, 28 Oct 2009 08:30:59 +0000

Question asked by Mr. Sreenivas from Bangalore, Karnataka:
Dear Sir/Madam,
I have few points would like your response and appreciate for the answers.
1. I have land near Bangalore, Hoskote Taluk (1.75 acres). Can I convert this land?
2. I have fenced the land and not growing anything for now; is it an offence not to grow anything?
3. The main land was divided into two and one portion is sold to me. Still there is separate survey number to this plot. Is it a problem? Or what I should do? I have been misled by many to different alternatives.
4. When should one pay the yearly fees for the land and where should I pay the taxes?
5. Will it be a problem if I am not able to cultivate anything and will anybody occupy this land if it’s not used?
Appreciate your response in advance
with many thanks & regards,
Sreenivas
Vatsala Answers:
1. The land can be converted subject to its present zonal use as defined in the CDP or the BMRDA master plan.
2. An agriculturist is defined as a person who cultivates the land personally, but it is not an offence not to grow any crops.
3. The can be two separate survey numbers, and there should not be any problem arising from it.
4. You should always guard against encroachments by fencing the property, putting a securing guard from a reputed agency or though known sources and keeping an eye on it now and then.
Vatsala
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What is the procedure for re-registering the sale agreement to make spouse as co-owner?

atoneplace — Tue, 27 Oct 2009 06:46:48 +0000

Question asked by Srijith Menon from Bangalore, India:
Hi, I have purchased a flat in 2006 Nov taking a loan from ICICI bank where my wife is a co-applicant. But the registration was done only on my name since my wife was traveling overseas that time. Now from your columns I understand that to avail the tax benefit the co-applicant has to be the co-owner also. Can you please tell me the formalities & normal taxation / charges included in this procedure of re registering the sale agreement to make wife as the co-owner along with me. Since the original sale agreement is with the bank how do I retrieve it, will the bank allow me to take it out for doing this transaction or with out the original sale agreement, I can get this done (I have the duplicate copy of the sale agreement duly stamped & certified by the registrar with me)
Request you to clarify this so that both of us can avail the tax benefits.
Regards
Srijith Menon
Vatsala Answers:
There are normally two documents when loans are disbursed. One is the sale agreement and the other is the sale deed. In your case it is not clear which document is with the bank. Normally a sale agreement precedes a sale deed and the agreement is not usually registered but the sale deed has to be registered. If you have just deposited the agreement, it is easy to get the original out of the bank and execute it again jointly with you wife. If it is the sale deed, you have to execute another registered gift deed gifting half the property to your wife. This will supersede the earlier deed (which can remain with the bank) and you both will become equal owners. Please take the permission of the bank before doing any of this.Vatsala
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What are the latest Indian rules for repatriation and what is the procedure to follow?

atoneplace — Sat, 24 Oct 2009 08:40:26 +0000

Question asked by Shiva Badruswamy from New York, USA :
Hello there:
Thank you for being very informative about real estate Indian laws. I am about to inherit a property in India worth roughly $1 million. I am a US Citizen of Indian Origin. I want to sell the property and bring the cash over to the US or buy another property in another country or invest in any security. What are the latest rules and what is the procedure to follow?
Best wishes,
Shiva Badruswamy
New York, NY, USA
Vatsala Answers:
You can sell the property and repatriate the funds. NRI / PIO may repatriate the sale proceeds of immovable property in India. The following are the latest rules:
(a) If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account. The amount to be repatriated should not exceed the amount paid for the property:
1. in foreign exchange received through normal banking channel or
2. by debit to NRE account(foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.
Repatriation of sale proceeds of residential property purchased by NRI / PIO out of foreign exchange is restricted to not more than two such properties.
Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate an amount up to USD one million, per financial year, as discussed below.
(b) If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bona fide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.
If you invest in another country where the double taxation avoidance treaty has been signed, you have to pay only the difference in the taxation amount.
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Will I become party to evasion of stamp duty?

atoneplace — Sat, 24 Oct 2009 08:20:39 +0000

Question asked by Anonymous:

Hi I have a question to ask. I bought a house from Builder in Hyderabad in August 2006. The agreement of sale was for 33 lakhs. The registry was done at a lower cost 18 lakhs in august 2006 itself. The flat was under construction that time. I also took a loan of 27 lakhs from the bank for it. Now I am selling the house for 62 lakhs. The buyer is taking over my loan. The bank will give me a difference between loan amount sanctioned and selling price i.e. 30 lacs (Cheque) and the buyer will give me 5 lacs. So in total I am getting 35 lakhs in my account. Now the questions are:

1. The Buyer wants to get the registry of the flat done at 25 lacs. How is that possible as he is giving everything in white? How will I explain to income tax authorities as to where this 35 lac came from when I sold the house for 25 lacs (as per the registry) and where did I get the money (27 lacs) for prepayment of loan. Will I become party to evasion of stamp duty in this case? (There are two agreements, one is agreement of sale which shows the correct price on which the bank finances and the other is the sale deed which shows the amount in the registry and is registered)

2. What documents do IT authorities refer when calculating Capital Gains?

3. The builder is the agent through which I am reselling the flat. And I am paying him a commission of 100/- sq. ft. Now, I got to know that he is fooling the new customer by collecting service tax and VAT from him which is not applicable on Resale Flat. And he will keep that amount with him. Now the question is if the new customer some day knows that Service Tax and VAT was collected from him and is not applicable then can I be in trouble as the builder is just the agent, I am the Seller of the flat? What should I do?

Thanks in advance

Vatsala Answers:

1. The agreement of sale showing the full amount will protect you against income tax queries, despite the lesser value in the sale deed. You can show the extra amount towards fittings, furniture, right of use of car park, right of use of common amenities, deposits kept with builder for water, electricity and maintenance charges.

2. It is open to the IT authorities to rely on the sale agreement (if it is deposited with the bank) and the sale deed.

3. It is not correct for the builder to collect VAT and service tax again from the new purchaser. It should be accounted for under brokerage or some other account. In any case you need not collect it in your name. Vatsala

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Can A Builder Ask For VAT And Service Tax Even If He Didn’t Mention About Them At The Time Of Sale?

atoneplace — Thu, 05 Mar 2009 01:29:11 +0000

Question asked by Mr. Amrendra Singh from Bangalore:
Hi I came to know about u from some of my friends.
Now the problem I am facing is as below.
1. I had bought a flat in Bangalore from the builder â€œUKN Esparanza â€œ some 3 months before and at the same time we have applied for the loan from IDBI bank. Now we have made all the payments towards the apartment including the deposits and other things and only the registration is pending.
2. Recently they have sent a demand lettter to pay the registration cost and included Vat and service tax with that. Though at the time of booking of the flat they have confirmed us that there wonâ€™t be any VAT and service tax charges.
3. I understand that there is a clause in the sale agreement which says that any taxes levied by govt. at the time of registration has to be paid by the customer, but they have not mentioned anything towards the VAT and the service tax on the breakup latter provided and the bank has also funded based on the breakup letter.
4. Now since the Vat and the service tax levied is in tune of 3 L, I am unable to pay the same.
Need your assistance in understanding that how we can handle the situation. As these charges were never been discussed at the time of the sale, how can a builder ask fr the same now.
Anticipating your fast reply in the regard.
Thanks & Regards
Amrendra Singh
Vatsala Answers:
VAT and service charges are statutory liabilities passed on the customer. You can approach a chartered accountant to determine if what the builder is demanding in lieu of the same is the correct amount or not. Other than that there may not be any way to completely escape paying it. Vatsala
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How Can One Get Back His Booking Amount If The Developer Is Not Meeting His Agreed Terms & Conditions?

atoneplace — Thu, 05 Mar 2009 01:06:24 +0000

Question asked by Mr. Amardeep from Delhi:
Hi, I am Amardeep .I am writing to you in great faith. I have the following query.
In the year Nov, 2006 I invested for a flat in a pre launch project in Faridabad in Delhi-NCR. In Nov.2006 I paid 2.55lacs as first Installment. In Jan 2007, I paid another 2.08lacs as demanded by the builder. Till date I have paid total of 4.65lacs approx. which is around 30% of the total base price of the flat.
This builder didn’t start the work as per the schedule. He started allotments in March 2008.Till that time there was no progress. In between I enquired and found that he made refunds also to many people who were influential. I also approached for the refund. He asked me to do some formalities like signature proof by bank, original receipts of payments made etc. I completed all the formalities and reached his office. Initially the person in charge for the refunds took the papers from me. After that he went to this promoter in front of me, talked to him and came back to return my papers saying we will not refund. By this time the process for allotment had also not taken off. He said get the allotment after some time and stay invested you can not exit while at the same time he was doing refunds to some other influential people. Even now he is shifting the people to another of his project in Gurgaon, which he has well marketed. Also made offer to me to transfer in another project which is also pre-launch.
I am harassed completely. First there is no sign of any development of the site as yet in Faridabad, when I visited the site last month. When I approached him the other day, He said we have started work. Digging is taking place there. Pay another 10%amount for the allotment. The entire plan now he has changed when I got the Brochure yesterday. Layout plan is changed. Secondly, Now they say that AC will be provided in the master bedroom only while at the time of booking, they said it is fully air-conditioned. There were two options for car parking earlier -Rs75000 for Open car park and 150000 for Covered parking. Now this amount is Rs200000 and its the only one option he is giving. I am no more interested as this builder is just making fool of the remaining investors and buying time by just doing little for the namesake at the site place in Faridabad. When I ask for refund, he traps me saying that I will get back only 2.45lacs.
Please tell me, in a pre-launch, this was the booking amount only which I paid. Now there is no allotment and as such no formal contract between me and the promoter. At any time can I exit? If yes, then what are the scenarios–
1 After paying penalties
2 Or without penalty.
If I have to pay penalty, then to what extent. Will it be as high as 50%.How Can I get back my hard earned money from this Promoter. Am I entitled to get back my entire booking amount with interest? What are the channels whom I can approach for this gross injustice? Please Guide.
Thanks a lot in advance.
Warm Regards,
Amardeep
Vatsala Answers:
It appears that you are in the clutches of an unscrupulous developer. You are not required to pay any penalty. You should file a suit for recovery of money with interest either in the consumer court (which will be decided faster) or in the concerned civil court. You are entitled to the recovery of full monies paid with interest. You can also ask for compensation for mental harassment.Vatsala
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What Should Be Done If The Documentation Between Original Land Owner And Erstwhile Seller Is Missing?

atoneplace — Wed, 04 Mar 2009 01:53:21 +0000

Question asked by Ms. Megha Nandkumar Belwalkar from Mumbai:

Sir/Ma’am, I have like a house at 1st Floor in a chwal structure at Malavani Village, Malad (West), Mumbai. It is a chwal system Ground + 1. They call that area as ‘Gavthan’. When I demanded papers to check they have given me following documents:
1) 7 x 12 extracts (Showing agricultural land)
2) Agreement between erstwhile seller & recent owner
3) Power of Attorney executed by erstwhile seller in favor of recent owner
My question is – if 7 x 12 is showing the original land owner name and agricultural land and there is no documentation between original land owner and 1st purchaser and 1st purchaser and erstwhile seller;
If any structure is constructed before 1990s and BMC is charging property tax for the property in the name of recent owner.
Can I pay stamp duty and register my house document. Is it possible to convert land into Nonagricultural. (if not converted).
After purchase and occupation of house, is there any possibility that any authority (govt./non Govt. and/or Political) will come and show it as illegal and can demolish the same.
Please give me OPINION on the above matter.
Thanking You.
MEGHA N B

Vatsala Answers:

I understand that you want to purchase the property and have been given a few documents. You should get the same verified by a reputed local lawyer who will guide you. If is unwise to proceed without doing this. There are many issues which might have to be looked into in a case like this by a local lawyer.Vatsala

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Do One Needs To Pay Service Tax And VAT In Resale?

atoneplace — Sat, 04 Oct 2008 01:27:41 +0000

Question asked by Vikas Verma from USA:

Dear Vatsala
I highly appreciate your efforts in resolving lot of property related queries. I am in a bit of a situation and need your help. I am planning to purchase a flat in Hyderabad, this is a new development. Developer started selling flats in this development in 2005, and the flats are ready for possession by next month ie Sep. 2008. There are few flats still up for sale from the developer. Lets say the price developer is quoting right now is Rs X / sft + amenities like car parking and common amenities like clubhouse etc (y) developer would charge + service tax (z) + VAT (A) and registration
(B). So the total cost of purchasing this flat for me would be X+Y+Z+A+B.
I have been speaking to a gentleman for purchasing a resale flat in the same development, he has got the flat registered on his name and there was no VAT and service tax when he purchased it in 2005, so he has not paid either VAT or Service tax for this flat. Could you please tell me what would be my total cost of purchasing the flat in resale if the value of flat is 0.9X that I am being quoted? To simplify it further would I be required to pay VAT and service tax if I bought this property in resale now, also, will I be required to do the registration and pay 10% / 12% what ever is the prevailing rate? Is there any way I could reduce the cost of registering this property in resale. This gentleman whom I am planning to buy the property is an NRI.
I would highly appreciate your inputs, apologies for any naivety since this is my first property purchase.
Cheers
Vik

Vatsala Speak:

On a resale flat no VAT or service charges apply. However registration and stamp duty charges have to be paid. This can be reduced by not showing part of the consideration in the sale deed (but only showing with the guideline value, which is less than the market value). You could show the other amount against fixtures and fittings in the flat or alterations/ improvements done to the flooring, etc.Vatsala

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How much VAT should be paid?

atoneplace — Wed, 20 Feb 2008 02:12:42 +0000

QuestionÂ asked by MrÂ Moorthi Subramaniyan from Bangalore:

Vatsala,
Hi, I am Moorthi, recently I got registered my flat in a small apartment (it has 12 flats) in Bangalore.
My agreement with builder is Rs. 9L for land cost & Rs. 21L for construction (including electricity, water, registration etc).
My question is, How much VAT I need to pay (based on 4%)? Can you help me on this?
Regards
Mr. Moorthi Subramaniyan, Bangalore

Vatsala Answers:

Service tax will not be attracted for a complex where the total number of Apartments is 12. Regarding the VAT liability, it may not be payable on the entire amount of Rs.21 lacs. Definitely the amounts charged towards cost of registration and obtaining electricity and water connection should qualify for abatement. On the balance amount, the builder has two options for collecting VAT, viz., either the compounding option or the actual value option. If he prefers compounding option then the VAT is payable on the balance amount at 4% in Karnataka. If the builder chooses collecting VAT on the entire balance amount because it is more beneficial to him, then it is payable at 4% to 12% (depending on the construction material) on actual value added after taking credit for the VAT suffered on the inputs. While you cannot force the builder to choose a particular option, if the builder does not go for compounding option, then you can apply compounding rate of 4% on the balance amount as aforesaid and compare the same with the VAT charged by the builder and check whether it is more favorable. Vatsala

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Repatriation by an NRI of All Proceeds from Sale of Residential Real Property in India, Purchased With Foreign Exchange

atoneplace — Tue, 19 Feb 2008 03:20:46 +0000

QuestionÂ asked by MrÂ Suphal Agrawal from USA:Â

Gentlemen, I was referred to your site by one of my relatives in India.
I am a male of Indian origin, now a U.S. Citizen for several years. I am interested in purchasing residential real property near Mumbai with a goal to sell it later on (time not definite yet, but could be anytime after a year or so, depending upon the local market situation and my own financial plans) and then buy something else, but eventually I intend to repatriate all proceeds — my original investment and all gains — back into the U.S. Based on my extensive search on this topic, here is what I understand:
1) I am classified as an NRI due to having held an Indian passport previously, and due to both my parents being Indian
2) As such, I can buy residential real property in India without any specific permissions; I can pay for it via wire transfer from my US bank to the seller’s bank in India; later, I can sell it to an Indian citizen or another NRI but must hold it for at least three years after my last payment (or three years after registration, if paying all cash) — language is confusing on this three-year-hold point; through an NRO account, I can have the seller repatriate proceeds to my US bank, but ONLY in an amount not to exceed my original payment for the property
3) As an NRI, I can only do a maximum of two such sales and repatriations (principal investment only) in my lifetime
Specifically, my key concerns are: 1) Can I repatriate all gains and all investments from the sale of residential real property purchased by paying for it in forex? 2) Can I do it as and when I choose? And, 3) Does my registration as a People of Indian Origin — PIO — have any impact on my ability to do these things?
I would very much appreciate your time in helping me with the above specific questions (particularly, repatriation of all proceeds from the sale of real residential property), and I will be especially grateful if you could reply at your earliest. My contact information is noted below. Thanks again.
Sincerely,
Mr. Suphal Agrawal, USA

Vatsala Answers:Â

1. You can very well purchase residential properties in India out of foreign remittance from abroad without any prior permission of the RBI.
2. However, the repatriation of sale proceeds of residential properties is restricted only to two properties.
3. There is no lock in holding period for sale and repatriation.
4. The amount repatriable will be restricted to the amount brought in by way of foreign currency. If it was acquired out of balances in FCNR/NRE account, it will be restricted to the value of foreign currency equivalent of the Indian Rupee used for acquisition on the respective dates on which the Indian rupees were paid for purchase of the properties.
5. The repatriation option is further subject to the condition of the applicable capital gains tax on the property having been paid already. Vatsala

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