The selling of property involves a lot of things and responsibilities. As, one needs to deliver what is been promised to the buyer. Also, the property has to be in good shape as the buyer is not willing to pay for a structure that requires huge renovation as he/she already has to pay a huge amount for buying the same. So, you being a seller must ensure higher [ROI] Return on Investment.
Interestingly, there are two types of sellers. One likes to sell their property directly while others hire a broker to crack a deal. But, both of these sellers must keep the tax and legal aspects of home selling in mind as the rules are same for all citizens of India and thus one can’t escape the tax and legal implication while completing the home selling procedure. So, let us first understand the legal aspect of selling a home.
Legal Aspect to Consider Before Selling a Home
- Sign a MoU with the Buyer in Advance – The memorandum of Understanding is a letter of understanding according to which the seller and a buyer agree on various issues such as mode of payment and time period of paying the whole selling/buying amount. Also, this is an agreement to state how much is due to the seller and the buyer while closing a deal. In fact, this is the best way to get secured from the fraudulent who cheat people in the name of selling legal properties to various aspiring home buyers.
- Take help of a Legal professional to Make Sales Agreement – An advocate is the best person to make a sales deed. This is because he/she has a sound knowledge of the law and therefore the person creates a lawful documentation of the property in order to finalize the deal. Also, the person makes sure to add all the necessary information into the agreement and thus there is no chance of placing false or inadequate information on the property selling papers.
- Addition of Property Handover Clause – If you are selling a residential property then you must add the property handover clause in the sales agreement. This clause will keep you secure from any kind of legal problem in case it surfaces after selling off the property. As, you can produce the copy of this sales agreement which clearly mentions that you have handed over the property to this particular person on DD-MM-YY of this financial year. This applies same to the buyer as he/she can send a legal notice to the seller while asking for the selling property with flaws.
This was the legal implication a seller must consider before making a final deal. But, property selling also includes several legal issues which every home seller must know. So, here are the legal things you must know while selling a home.
Make sure you involve a lawyer while completing a home selling procedure. This means that there are three people involved in this procedure and the first one out of them is a Seller, second is a Buyer and the third is an Advocate.
An advocate is a person who ensures that the sales deal is being completed lawfully. This is important to transfer the property title and other necessary credential accurately in order to receive selling amount at the earliest. Also, a lawyer helps you save more as he/she knows how to get the tax deducted on the amount one receives after selling a home.
Tax Implications You Must Know When Selling a Property.
- Check, In Case you Get Tax Deduction
According to the Income Tax law, a person is eligible for a tax deduction in case he/she sells a residential property within two years of buying it. This selling of property is said to be a short-term Capital Gains Tax. The amount you incur from selling a home in this time period helps you avail the tax benefit under the prescribed Income Tax slab. But, the amount you receive by selling a home will be added to your annual income for the particular financial year and then a tax deduction will be offered according to the Income Tax Law.
- Tax Implication for Selling Home After Five-Years
In case you sell a home after a gap of five years of buying it then you will gain zero tax benefits. Yes, a person is not eligible for enjoying any kind of tax deduction if the property he/she is selling is five-year-old property while assessing it from the current financial year. Let us elaborate it with an example, the home bought in the financial year 2013-14 is being sold in the current financial year won’t allow you to avail any tax benefit.
- TDS Deduction is Mandatory for the Buyer
The seller must ask for the TDS Certificate from the buyer who is required to pay 1 percent TDS under the Income Tax Law in case the property values more than 50 lakhs INR. This TDS deduction is being paid by the buyer on the behalf of the seller which is then submitted with Form 26QB to the Income Tax department. Also, this deduction is directly linked to the PAN – Permanent Account Number of the seller for availing the TDS Certificate.
Keep all these points in mind because hindrance in tax and legal aspect of selling a home can land the seller in trouble. So, keep everything handy as soon as you decide to sell a residential property. As the problems in transferring of title can lead to your loss as the buyer is likely to give a second thought to buying property.