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The Goods and Services Tax (GST) has transformed the taxation landscape in India, bringing several indirect taxes under a unified regime. One area where GST has raised questions is its applicability on rental income from both residential and commercial properties. In this blog, we will delve deep into the concept of GST on rent, exploring the nuances of its application for both residential and commercial properties, providing examples to clarify the subject.

 

Before diving into GST on rental income, let's first understand what GST is. GST, or Goods and Services Tax, is an indirect tax that replaced several former taxes like service tax, VAT (Value Added Tax), excise duty, and others. It is levied on the supply of goods and services and is applicable across the country, with few exceptions. The objective of GST is to simplify the taxation process and to make the system more transparent.

Under the GST regime, the rate of tax depends on the type of goods or services being offered. In terms of real estate, GST affects both the sale of under-construction properties and rental income.

 

GST on rent is governed by specific provisions that distinguish between residential and commercial property rentals. It's essential to understand this distinction, as the tax implications differ significantly.

 

As per the GST law, residential properties used for personal purposes are exempt from GST. In other words, if you're renting out your house or flat for someone to live in, you don’t have to worry about paying GST.

When is GST Not Applicable on Residential Rent?

  1. Residential Property for Residential Use: If you are leasing a residential property solely for living purposes, no GST will be charged. This exemption applies even if the owner is registered under GST for other activities.

  2. Renting Residential Property to Unregistered Persons: If the tenant is not registered under GST and the property is being used for residential purposes, the rent is exempt from GST.

 

Example 1: No GST on Residential Rent

Suppose Mr. Rajesh owns an apartment that he rents to a family for living purposes. As the rent is for residential use, no GST will be charged, and the tenant is also not required to pay any GST.

When is GST Applicable on Residential Rent?

Although renting out a residential property for personal use is exempt from GST, certain conditions trigger the GST liability:

1. Residential Property for Commercial Use: If a residential property is rented out to a business or for any commercial purpose, GST will be applicable. This could be the case when the residential property is used as a guesthouse or rented out to a company for its employees.

2. Renting to a Registered Business Entity: Even if the property is residential, if the tenant is a registered business entity using the property for commercial purposes (e.g., office accommodation for staff), the rental income becomes liable for GST.

 

Example 2: GST on Residential Rent for Commercial Use

Mr. Shyam rents his flat to a company, XYZ Pvt. Ltd., for use as a guest house for its employees. Since the property is being used for commercial purposes, Mr. Shyam must charge GST at 18% on the rent, as XYZ Pvt. Ltd. is a registered business entity.

 

Commercial property rent is more straightforward compared to residential property rentals. Any rental income generated from commercial properties (e.g., shops, office spaces, warehouses) is subject to GST, provided the annual turnover exceeds a specific threshold.

GST Applicability on Commercial Property

   • Threshold Limit: As per GST regulations, if a person's aggregate turnover exceeds ₹20 lakhs (₹10 lakhs for Special Category States) in a financial year, they are required to register under GST and pay the applicable tax on commercial rent. If their turnover is below this threshold, they do not need to register for GST, and hence, no GST is applicable on the rent received.

   • GST Rate: The current GST rate applicable on commercial property rentals is 18%. This includes 9% CGST (Central GST) and 9% SGST (State GST) for intra-state rentals or 18% IGST (Integrated GST) for inter-state rentals.

 

Example 3: GST on Commercial Rent

Mr. Rohit owns a commercial property that he rents out for ₹50,000 per month to a retail store in Mumbai. His annual rental income exceeds ₹20 lakhs, so he is liable to charge 18% GST on the rent. The monthly GST charge would be:

• Rent: ₹50,000
• GST (18%): ₹50,000 x 18% = ₹9,000
• Total amount payable by tenant: ₹50,000 + ₹9,000 = ₹59,000

Reverse Charge Mechanism (RCM) on Rent

The reverse charge mechanism (RCM) under GST means that the recipient (tenant) pays the tax instead of the supplier (landlord). This provision applies in specific cases of rental transactions.

• Residential Property Rented to a Registered Person for Business: Effective July 2022, GST under RCM is applicable when a residential property is rented to a registered person for business purposes. The tenant must pay GST under RCM, even if the property is residential.

 

Example 4: Reverse Charge on Residential Rent

Mr. Arjun rents his residential property to a registered business entity, which uses it as a guest house for visiting employees. The entity is liable to pay GST under RCM, as the property is being used for commercial purposes.

Input Tax Credit (ITC) on Rent

Input Tax Credit (ITC) allows businesses to claim credit for the GST paid on inputs, thus avoiding the cascading effect of tax. ITC can be claimed on the GST paid for renting commercial properties but not for residential properties.

• Commercial Rent ITC: A tenant can claim ITC on the GST paid on commercial rent if the property is used for business purposes and the tenant is a registered taxpayer under GST.

• Residential Rent ITC: No ITC is available for GST paid on the rent of residential properties, even if they are used for business purposes.

 

Example 5: ITC on Commercial Rent

ABC Pvt. Ltd. rents an office space in Delhi and pays ₹1,00,000 in rent, along with ₹18,000 GST. Since the office is used for business purposes, ABC Pvt. Ltd. can claim ₹18,000 as ITC while filing its GST returns.

 

Landlords renting out commercial properties are required to register under GST if their total turnover exceeds ₹20 lakhs. Even if the rent is the only source of income and exceeds ₹20 lakhs annually, the landlord must register for GST.

 

• If the rental income from commercial property is below the threshold limit, the landlord is not required to register for GST.
• Renting residential properties solely for residential purposes does not require GST registration, irrespective of the rental income.

 

Landlords registered under GST must comply with regular GST filings, including monthly or quarterly GST returns (depending on the type of registration) and annual returns. They are also required to issue GST-compliant invoices to tenants, mentioning the rental amount and GST charged.

• Form GSTR-1: Landlords must report outward supplies of rental services in GSTR-1. This return contains details of all the rental income along with GST collected.

• Form GSTR-3B: This is the monthly self-declaration form, where landlords must declare the GST liability and pay the tax.

 

Failure to register under GST or comply with GST laws can result in penalties. These penalties can range from 10% of the tax due (subject to a minimum of ₹10,000) to 100% of the tax due if there is deliberate fraud.

 

Key Takeaways

   • Residential Rent: GST is not applicable on residential properties used for living purposes, but it applies when rented for commercial use.

   • Commercial Rent: GST is applicable on all commercial property rentals, provided the landlord's annual rental income exceeds ₹20 lakhs.

   • Reverse Charge Mechanism: If a residential property is rented to a registered business entity, the tenant must pay GST under RCM.

   • Input Tax Credit: ITC can be claimed on commercial rent but not on residential rent.

   • Threshold for Registration: Landlords must register for GST if their aggregate turnover from rent and other income exceeds ₹20 lakhs annually.

   • Compliance: Landlords must file regular GST returns and issue proper invoices for rentals where GST is applicable.

 

Understanding the GST implications on rental income is crucial for both landlords and tenants. While residential rents are mostly exempt from GST, commercial rents are subject to the tax, and compliance is essential to avoid penalties. By staying informed about the rules, both parties can ensure smooth transactions and proper GST compliance. Whether you're renting out property or leasing one, keeping track of GST regulations will help in avoiding legal hassles and benefiting from available tax credits.

 

The real estate seeing expansion and positive buyer interest after the lockdown, the business dedicated concurred that the area is gradually returning on target with monetary organizations are currently making big financing accessible to the real estate.

 

Engineers are currently assured of the development ahead and hopeful for an extraordinary revival. Still, the dreadful of a pandemic is as yet not finished and land designers are as yet cooperating to beat the difficulties.

 

There is a positive sign observed across the economy, and as GDP development occurs through the V-formed recovery, the part of recovery in real estate, particularly office spaces, stays a worry considering 'telecommute' as likewise 'work from the distant area'. Likewise, while the SWAMIH Fund has progressed nicely, there are many slowed down and postponed projects, restarting of which will require an increase of the asset as additionally, financial organizations join the process.

 

Home credit loan costs are at very lows; a few states have decreased stamp obligation rates. What is likewise required is uphold for project money, and I trust positive advances occur – and soon. As the vaccination drive changes into high gear with the public-private association, one anticipates that normalcy should return by June-July this year.

 

There is an enormous chance we as a whole are sitting at. Interest costs are minimal and builders have been reasonable about the evaluating and government activities, for example, the decrease of stamp obligation has assumed a significant part. Individuals are wandering out and purchasing homes. Developers should keep giving their best to guarantee the rates don't go up.

To boost the on-hold projects in Maharashtra, the state government has declared that development work on lands of 3200 sq. ft. should proceed with development work without taking approval from the urban planning department; the motive is to speed up the development in rural Maharashtra announced by the Rural Development Minister Hasan Mushrif.

 

Before starting the development on lands measuring 1600 sq. ft. i.e. (150 sq. m.) owner should be ready with documents like land title, layout plans, buildings plan, survey maps, engineers certificate of consent and should submit at Gram Panchayat with concern fees. Then people of the village can proceed with the construction directly and will not require the commencement certificate for construction for plots measuring from 1600 sq. ft. to 3200 sq. ft.

 

Rural minister Mushrif said, “The construction will achieve progress which required approval from urban planner because gram panchayat doesn’t have to run after urban planner for the development approval".

 

But if your land measurement is more than 3200 sq. ft. then you will need permission from an urban planner for the construction. The new rule will not be applicable for the Ratnagiri district at present.

 

Let's hope this decision by the state government will enhance the development of the rural sector of Maharashtra. 

If you are considering purchasing a home or flat in the coming days, then you should start getting ready for it right now, obviously, you have not searched your house yet. To purchase a house you may require a home loan. In such circumstances, if you already have a home loan ready before buying a new home, you won't need to run the bank at the hour of purchasing a home. Once you will find your home and the home loan will be approved already. The country's biggest bank, State Bank of India (SBI Home Loan) provides the loan for the same. For this, you need to go through few processes first.

 

Advantages of SBI Pre Approved Home Loan

 

SBI offers its clients a low-financing cost on pre-approved home loans. As per the instruction on the official site of SBI, handling charges are less. There is no concealed charge. You don't need to take care of a prepayment penalty. Additionally, the charges you get as interest are fixed by the decreasing balance consistently. You can repay the home credits for a very long time. Home advances are accessible as an overdraft. Ladies' clients additionally get a discount on the financing cost.

The advantage of a pre-approved loan is that the bank evaluates already by the criteria. When approved, it turns out to be simple for you to purchase a home. It requires some investment to move the advance sum once the house is fixed and you have already gone through the documentation.

 

Who can apply?

 

For this, the client must be an Indian resident. For this, citizens from 18 years to 70 years can apply. The loan term can be as long as 30 years.

Financing cost and expenses

In SBI pre-approved home credit, the financing cost depends upon the risk score of the client. As an expense, you are charged 0.40% of the total home loan (SBI home advance) sum and qualified GST which goes from 10 thousand to 30 thousand and GST. But, because of a tie-up with the builder's bank commonly, slight changes in expenses can be seen.

 

Necessary documents required for loan:

 

- ID card of the organization where you work

- Loan application structure loaded up with complete data with three passport size photographs

- PAN card/Passport/Driving License/Voter ID card as Identity Proof

- Duplicate of telephone bill/light bill/water bill/ gas pipeline bill or passport/driving permit/Aadhaar card as address or home proof.

- A half-year account statement of all ledgers you have  

- In the event that you have taken a loan previously, it’s the most recent one-year statement.

- Three-month payslip or certificate.

- Most recent two years Form-16 or Income Tax Return Paper.

- Business address confirmation.

- Income tax return papers of the last three years.

- Profit/loss and balance sheet in the last three years.

- Business license details.

- TDS certificate.

- If you are in CA, Doctor, or another profession, then certificate qualification will be required for that.

 

So don’t wait for the time when you will buy the home, just be prepared for the home loan already by applying at the SBI pre-approved home loan scheme.

 

When it is about saving for the future, the investment plays a vital role and the investment in lands is best for your high returns on investments. The maximum returns directly depend upon the right locality while buying plots. Now, there is a great opportunity for you to buy plots in the suburbs of Pune i.e. Uruli Devachi. This locality in Pune is going to get urbanized in few years and it will reward you with endless benefits on your investment in land.

 

So if want to be ahead of time and make a clever move then investing in plots of Uruli Devachi is a perfect option. When it comes to a crucial decision like buying a piece of land then the ability to see far in the future and to make the right choices requires outstanding skills. The rates of plots here are affordable and reasonable in current days, so considering the future development here and high returns on your investments; it is a good decision to invest in the plots of Uruli Devachi, Pune.

 

The value of lands will keep on boosting as the area is going to get modernized in the coming years.  The Pune real estate market is vouching for Uruli Devachi lands because it is getting developed at a high rate and it has become the favorite locality of every real estate agent. Out of the several reasons, the most logical is the affordability of the land rate in Uruli Devachi which is very rare currently in a big city like Pune.

 

This is will be your best investment if you want to live in traffic-free and peaceful surroundings, a place which is distant from the noise and hectic life of the city but also near to the necessary amenities civic facilities. The infrastructure here is less as the area is still going in through the process of development.

 

Property in Uruli Devachi you must know about

 

If you are looking for plots in Uruli Devachi, Tara Vishwa is an R-Zone and Non-agriculture zone land project by Tarai Developers.

 

About Tarai Developers:

 

Tarai Developers have about 30 Acers township projects to be lined up, it would be the Pune's best township ever Pune have seen, they are also providing a huge walking track with all the other amenities in the township planning.  If you want to be part of it, it is the best opportunity for you also they are a bit close to Pune's Biggest upcoming Ring Road and also to the Metro train track. They are within 5 km of all the convenient stations like schools, colleges, clubs, malls, and hospitals as well. They will fulfill your dream home at the lowest price in 2021.

About Tara Vishwa:

 

The land is fully developed with essential amenities and facilities like water availability, street light, drainage, tree plantation, nameplate, and walking track. This project has a clear title and a total of 100 Guntha available for sale and out of which 60% - 70% of plots are already sold out so hurry up and don’t miss the opportunity.

 

The plot is available from Rs. 11 lac onwards so on. The highlight of Tara Vishwa is that it lies in the middle of two ring roads and also close to International Airport and cargo hub. The road is sanctioned by PMC and PMRD. This property lies within PMC limits.

 

 

Some Key Advantages and Connectivity of Tara Vishwa:

 

-        Schools: Uro School, Bishop's School, Delhi Public School, Boston School.

-        Hospitals: Ruby Hall Clinic, Jahangir Hospital.

-        Shopping Mall: Dorabjee Mall, Local Malls

-        Railway Station: Pune Railway Station

-        Airport: Purandar International Airport, International Cargo Hub.

-        ATM: HDFC, AXIS, Indicash.

-        Bus stop: PMT Bus stop.

-        Clubs & Hotels: Corinthian Club

 

Residential Plots in Uruli Devachi have all the roads in good conditions in and around the city which ensures a good traveling and transport experience. The area holds enough potential especially when it is about infrastructure and industrial development. So the investment potential in Uruli Devachi high and investors should make use of this opportunity to make their perfect investment.

 

Check the below link to check complete Project Details:

 

Tara Vishwa one of the best properties in Uruli Devachi.

So choose your precious investment wisely and stay ahead of time because in forthcoming years Uruli Devachi is going to be the topmost priority for investment in Pune real estate market.