Legal Corner » Tax

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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Sales & Service Tax issues

atoneplace — Thu, 17 Jan 2008 01:28:52 +0000

QuestionÂ asked byÂ Divya from Banglore:

The size of the land is 1350 sqft approximately .After registering the appartmentÂ to our individual names in late 2007 ,we singed a construction agreement with the promoter to build and deliver the house to us. We have financed the appartment through housing loans.

The builder is now close to handing over the possession of the properties and there is one issue at this point.
1) There has been around 3-4 Lakhs that’s been collected by the promoter for each of these properties towards Sales & Service Taxes. This community development at the current phaseÂ has 35 plus apartments in two or three separate blocks.
a)Â I had already paid most of the S&S taxes to them, As per my interpretation of the recent rulingÂ from tax department in late 2007, the buyer is not liable for Sales & Service Taxes. When I asked them about this they said it does not apply to them and I’m still responsible for all the service taxes.So could you please help us in clarifying the follwing points.
1)Are we liable to pay serivce tax according to the latest rule.If yes how much percent?
I’m really puzzled and shocked at this situation and kindly request you take me as your client and help me out.
Please let me know how can I futher reach your office and engage your office in helping me with this issue.

Thanks in advance,
Kind Regards,
Divya

Vatsala Answers:

Hi Divya your question is similar to Rajesh Padmanabhanâ€™s question. See my post â€œSales and Service taxâ€¦Legal Help please!â€ on January 8th 2008. Good Luck!

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Is the customer liable to pay service tax according to the latest rule by the Government of India?

atoneplace — Mon, 07 Jan 2008 07:26:56 +0000

QuestionÂ asked by Divya k c from BangaloreUS:

Respected Mam,
My name is Divya k c, I’m basically from Kerala and I’m currently living in Bangalore. I am currently in need of a Legal consultation and support from a Real Estate expert lawyer in India who could help us with our current situation.
Myself Divya k c, my Husband Sinoj Nair who too lives here in Bangalore have bought an Appartment in Bangalore, from the Multi Group Builders.
The size of the land is 1350 sqft approximately .After registering the appartment to our individual names in late 2007 ,we singed a construction agreement with the promoter to build and deliver the house to us. We have financed the appartment through housing loans.
The builder is now close to handing over the possession of the properties and there is one issue at this point.
1) There has been around 3-4 Lakhs that’s been collected by the promoter for each of these properties towards Sales & Service Taxes. This community development at the current phase has 35 plus apartments in two or three separate blocks.

a) I had already paid most of the S&S taxes to them, As per my interpretation of the recent ruling from tax department in late 2007, the buyer is not liable for Sales & Service Taxes. When I asked them about this they said it does not apply to them and I’m still responsible for all the service taxes.So could you please help us in clarifying the follwing points.

2)Are we liable to pay serivce tax according to the latest rule.If yes how much percent?

I’m really puzzled and shocked at this situation and kindly request you take me as your client and help me out.
Please let me know how can I futher reach your office and engage your office in helping me with this issue.

Thanks in advance,
Kind Regards,
Divya, Bangalore

Vatsala Answers:

Clarification a) In a case where the builder, promoter, developer or any such person builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of the said residential complex, the contractor in his capacity as a taxable service provider (to the builder/Promoter/developer/any such person) shall be liable to pay Service tax on the gross amount charged for the construction services under construction of complex service [Section 65(105)(zzzh)
b) If no other person is engaged for construction work and the builder/promoter/developer/any such person undertakes construction works on his own with out engaging the services of any other person, then in such cases,-
â€¢ Service provider & service recipient relation ship does not exist.
â€¢ Service provided is in the nature of self-supply of services.

Hence, in the absence of service provider & service recipient relation ship & the service provided are in the nature of self-supply of services, the question of providing taxable service to any person by another person does not arise. Vatsala
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Who if anyone is liable for Service tax under construction of complex service ?

atoneplace — Fri, 04 Jan 2008 02:22:02 +0000

Question asked by Chetan from Dallas, Texas:

Whether Service tax is liable under construction of complex service [section 65(zzzh)] on builder, promoter, developer or any such personâ€”
(a)Â Who gets the complex built by engaging the service of a separate contractor, and
(b)Â Who builds the residential complex on his own by employing direct labour?Â

Vatsala Answers:
Clarification
a) In a case where the builder, promoter, developer or any such person builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of the said residential complex, the contractor in his capacity as a taxable service provider (to the builder/Promoter/developer/any such person) shall be liable to pay Service tax on the gross amount charged for the construction services under construction of complex service [Section 65(105)(zzzh)
b) If no other person is engaged for construction work and the builder/promoter/developer/any such person undertakes construction works on his own with out engaging the services of any other person, then in such cases,-
â€¢Â Service provider & service recipient relation ship does not exist.
â€¢Â Service provided is in the nature of self-supply of services.

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Problems with merging of two 1 BHK to one 3 BHK by Builder

atoneplace — Thu, 13 Dec 2007 01:57:32 +0000

QuestionÂ asked by MrÂ Sanjiv Jain from US:

I booked I have booked one 3 BHK flat in a new construction building and Iâ€™ll get possession in 6 months. This Flat has two numbers allocated to this (303+304). I checked with builder about the floor plan as approved by the corporation and found that this 3BHK is actually created by combing two 1 BHK flats. Builder told me that once building construction is over, he will get plan re-approved as per modified structure. According to him, I need to go for only single agreement of purchase and registration/stamp duty.
I want you opinion on this. Should I go for this agreement? Will I get single loan on this property or that will be treated as double home loan even if I go single agreement?

Mr. Sanjiv Jain, USA

Vatsala Answers:

As long as the modifications from sanctioned plan are internal, it will not amount to FAR violations. Hence you can proceed with the purchase. You should make sure that the builder gives you the Khata for your flat (in the name of the original owner, which you can get transferred to your name later) and the tax paid receipt prior to registration. The home loan will not be considered as a double home loan. If the builder gives you a Khata for two flats, you can get it amalgamated later. However in the sale deed you can show a single flat, showing both Khata numbers. Vatsalawww.atoneplace.com

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Tax on construction of building

atoneplace — Thu, 18 Oct 2007 00:46:29 +0000

QuestionÂ asked by MrÂ Wilbur D’Souza from Mumbai:

Hello, Im keen on constructing a building on my own property from which I will be forming a small partnership company. How will the tax be calculated? And what will be the percentage of deduction on the profits? Will appreciate if you could give throw some light on this.
Thank you.
Regards
Mr. Wilbur D’Souza, Mumbai

Vatsala Answers:

Is the partnership in the business of construction and sale of properties? If so, then the land and building will be considered as stock in trade and no capital gains will be charged on transfer. The tax you have to pay is the normal tax on profits made by the partnership firm at the end of each financial year. Vatsala

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