Buyers Should Avoid Making These Payments In Advance

Home buyers are often a jittery nervous lot. Most of them are entering the territory for the first time, and know not how to conduct themselves in carrying out a deal that is possibly going to be the biggest financial transaction in their entire lives. They do know that there might be many hitches in their way and caution would be the only key to successfully accomplish the task. But, they also do not want to project themselves as straight-jacketed novice either and open themselves to receive all sorts of information. In fact, in their eagerness to do everything “right” and with an “open mind”, home buyers often turn more vulnerable and do things that might turn out to be major financial mistakes. You would qualify as such a home buyer in case you are willing to deposit advance money with your seller or your bank or any third party.

Here are three places where you have to hold your horses and wait for the right moment before you spend your money:

Do not give the seller more than 20 per cent of the total value before registry

You are not one of those who starts with the bare minimum and can supplement only 20 per cent of the total value of the property while the bank will fund the rest. You can afford to pay 40 per cent of the value from your own pocket. This, however, does not mean you will give all this money to the seller before the sale deed is registered. The higher the upfront amount, the bigger the risk exposure.  Also, paying any value in cash is a strict no-no at all times. Every penny given to the seller must be on the record.

You do not have to pay the TDS in advance

With a view to tax capital gains, the government in the Budget 2013-14 introduced a system under which one per cent of the property value is taken as TDS (tax deducted at source) on deals exceeding Rs 50 lakh under Section 194/A of the Income Tax (I-T) Act. However, if your bank asks you to pay TDS before it disburses the loan, you must refuse. Under the law, the tax amount should be deducted only after the payment has been made to the seller. In case of an under-construction property where the loan amount is disbursed in installments, the tax money gets deducted with each installment.

Do remember that if you are buying agricultural land, you are exempted from this paying TDS.

Also read: Everything you need to know about TDS on property

You do not have to buy stamp papers in advance

We try to keep ourselves ready in every possible manner for a smooth transaction. This sometimes leads many of us to buy stamp papers in advance. In some states, you have the option to buy stamp papers of the worth that you have to pay as duty and submit it at the time of property registration. However, these papers are non-transferable, non-refundable and are valid for only six months. In case of a delay or falling apart of the deal, you will end up losing a substantial amount of money --- stamp duty charges in Indian states vary from four to 10 per cent.

Also read

Going To Buy A Home? Know The Stamp Duty Rate In Your City