Oct 13 2008, 12:20 AM
To arrive at a correct and more realistic estimate of returns, an investor should consider the following factors:
• Acquisition cost: The buying costs are higher than other asset stocks. For instance, the transfer of property requires registration and payment of a stamp duty. Some of the addiction costs involved are:
• Stamp duty
• Broker commission
• Miscellaneous costs of drawing up legal documents
Principal repayments are eligible for a rebate at 15 or 20 % depending on the income bracket of a sum of up to Rs 70,000. This is applicable for housing loans from specified sources like banks, housing loan companies and most categories of employers. Gains from Properties for sale in Tripunithura held for less than three years are taxed as short-term capital gains (STCG) and taxed at the normal tax rates applicable to the tax payer. For property held for a period exceeding three years, the gains will be taxed as long-term capital gains (LTCG) at a concessional rate of 20%. Further, in case of LTCG, the taxpayer can claim the benefit of indexation – increase the cost of acquisition against the inflation index. For property acquired before 1 April 1981 will be taken as the cost of acquisition. In computing capital gains, this section seeks to tax a notional amount in the hands of the seller. And so, where the consideration for the transfer of the property is less than the value adopted or assessed by any State Valuation Authority (SVA) for determining the stamp duty liability, the consideration actually received will be substituted by the valuation adopted for stamp duty for the purpose of computing taxable capital gains. LTCG is not taxable when it id reinvested in another residential house property a year before or two years after the date of transfer, or constructed within three years of the date of transfer. The quantum of LTCG that is exempt is the cost of the new asset or the LTCG, whichever is lower. An important cost is the loan taken – including the processing charges and interest. Since real estate entails a sizeable investment, many investors opt to leverage the asset value to part finance the investment.