According to a report released today by real estate firm CBRE, sales of luxury houses valued at Rs 4 crore and above rose 97% over the previous year in the seven major Indian cities between January and September 2023.
The report states that Hyderabad, Mumbai, and Delhi-NCR account for 90% of all sales of luxury homes. 13% came from Hyderabad, 35% from Mumbai, and 37% from Delhi-NCR. Pune is responsible for the final 4%.
The desire for higher living standards, a strong economy, rising disposable incomes, and a shortage of luxury homes in large cities all contributed to an uptick in luxury home sales.
According to CBRE, there will likely be additional growth in the sales of luxury homes from the October through the December holiday season. The company anticipates a rise in people purchasing luxury homes for the first time in the October-December quarter.
“A growing Indian economy and rising aspirations are the causes of this spike. Aside from the post-pandemic need for larger spaces, some of the reasons for this surge in luxury home sales are incentives by developers.
According to the CBRE report, there will be a spike in residential sales and new launches in the premium and luxury housing segment due to economic growth, advantageous regulatory measures, and changing lifestyle preferences. It could result in residential sales reaching a 10-year high in 2023.
It further claimed that as buyers look for larger living spaces following the pandemic, developers’ incentives and the introduction of smart home technology are driving the surge in sales of luxury houses.
According to CBRE, this increases the rising demand for luxury properties among high-net-worth individuals (HNIs) and non-resident Indians (NRIs) looking for safe and lucrative investment opportunities.
These patterns imply that the Indian real estate market is seeing the growing importance of luxury residences.
Real estate is one of the country’s most important economic sectors. Many people in the country rely on property rentals as a source of income. The impact of GST on the property rental industry has been significant. Learn more about GST on commercial properties by reading this blog.
In India, how is commercial rent taxed?
If you rent out your property for commercial purposes and earn more than Rs 200,000 per year, you are subject to GST. GST applies at 18% of the taxable value.
Who is responsible for GST on commercial property rent?
Owners of rental properties are required to collect GST from renters. This GST is part of the rent. If the rent from AY 20-21 onwards is Rs 2.4 lakh a year, the rent payer must deduct 10% income tax.
Both residential and commercial properties are subject to TDS. TDS is not taxed.
Commercial property tax breaks are available.
Commercial property can be bought and sold.
The standard deduction
Commercial properties rented at a set price are eligible for a 30% repair deduction. It allows you to save a reasonable amount of tax regardless of how much you spend on your property purchase.
Interest deduction on loans
You can deduct the total interest paid on loans involved in buying or building commercial real estate to modify or build real estate. In this category, upfront penalties or processing fees are also tax deductible. It is only valid for the year of ownership following completion. You can also claim the total interest paid in five equal installments before the year of purchase.
Use of commercial property for work/ business.
You cannot deduct fictitious rental income. You can deduct depreciation and the interest paid on the loan used to purchase the property. The actual cost of maintenance and repairs is tax deductible.
The new tax regime limits tax deductions for commercial real estate loan interest. Section 24 deductions for rented property do not apply. You can charge up to the annual net sum of gross rent minus municipal tax if you claim interest and standard deductions.
How much of your rent is tax-free?
You are not required to pay tax on amounts previously paid as property tax. Deduct current-year property taxes from gross rental income or gross annual value (GAV) for the year.
Section 24A of the Income Tax Act allows for a 30% deduction from net annual value. People pay no tax on this amount and deduct it from their taxable income. Other expenses, such as painting and repairs, are not tax deductible once the 30% limit under this section applies.
Assume an owner takes out a loan on a rental property. In this case, the loan interest paid during the fiscal year reverts to rental income after standard deductions. This rebate is allowed under Section 24B of the Income Tax Act.
Interest on borrowed capital for acquisition, construction, repair, or diversion is deductible in the case of rental property. The Income Tax Appeals Court has ruled that owners are not required to pay taxes on unrealized rental income for unpaid rent.
Because rental income is taxable under sections 22 and 24 of the Income Tax Act, this section only applies to income from habitable land. Renting vacant land is taxable as other sources of income.
How is rental property tax calculated?
After deducting municipal taxes, standard deductions, and home interest, compute rental income taxes based on the Gross Annual Value (GAV).
Consider the following example to demonstrate how to calculate taxable income on a rental property:
Assume the owner receives Rs 30,000 in monthly rental income and pays Rs 30,000 in local tax (calculated using the property unit area system). He has also taken out a home loan and is paying Rs 90,000 in interest to secure it.
Calculate your taxable income as follows:
Rental Property Income
Amount in Rs.
Gross Annual Value
4,80,000 (40,000 per month)
Deduct Municipal Taxes
30,000
Net Annual Value
4,50,000
Deduct: 30% standard deduction
1,35,000 (30% of 3,30,000)
Home loan interest
90,000
Income from house property
2,25,000
Tax Calculation on Rental Property
In this case, the GAV of the property is Rs 4,80,000, which is greater than Rs 2,50,000, so tax is due on the rental property. If you pay Rs 20,000 monthly rent, your GAV is Rs 2,40,000 (20,000 *12).
How can I avoid paying rental income taxes?
The following suggestions will help you save money on your rental income taxes:
Upkeep fees:
Deducting maintenance charges from rent is one of the simplest ways to save tax. The cost of maintenance can include in the rent. In some ways, the tax on rental income is rising. For example, if you calculate a rent of Rs 50,000 and add Rs 10,000 for maintenance, you must pay taxes on the entire amount. However, you can save Rs 10,000 in tax by excluding such costs from maintenance charges. The lease contains only one line saying that tenants can pay maintenance fees directly to the society association.”
Municipal taxes:
A few individuals realize that municipal taxes, such as property and sewerage fees, can be deducted from rental income. The only requirement is that the property owner pays all municipal taxes. Tenants are frequently liable to municipal taxes. As a result, the tenants’ payments are not deductible. Municipal tax credits reduce your tax liability by lowering your income from real estate.
Joint Possession
You can pay taxes on your rental income if you buy a property with a trusted family member (husband/wife/parents). Rental income is shared and taxed with other family members in such cases.
Fully or partially furnished properties:
The property owner will provide amenities such as WiFi, a gas connection, DTH/cable TV, and a newspaper. Such charges are typically billed as rent and paid by the owner’s relevant authorities. In such cases, you can request that the lessee pay the bill and deduct the rent amount. Alternatively, you can collect them separately from the tenant. It’s not part of the rent. Therefore, rental income will decrease.
Standard Deduction:
When a property is purchased and rented for investment purposes, it follows that there will be some costs for repairs and maintenance. 30% of the annual net value can be claimed as a standard deduction regardless of the repair costs.
What is the GST rate on commercial property maintenance fees?
Buyers must pay GST on maintenance costs plus GST on property purchases. The builder levies 18% GST on monthly maintenance fees of around 4000 rupees. Maintenance charges are exempt from GST up to Rs 7700/- per month.
What are the tax advantages of a commercial property loan?
Tax break under section 24(B)
This section allows salaried individuals to claim income tax breaks on property loans. If the loan is used to [purchase a new home, you are eligible for a tax credit of up to Rs. 2,00,000. Interest payments are tax-deductible.
Section 37 (1) Tax Benefit:
Property loans are not tax deductible, whether they are for business or personal reasons. Because you are investing in real estate, a loan for investment reasons may be tax-free.
What is the penalty for failing to declare rental income?
When landlords intentionally omit income from their returns, the IRS imposes fraudulent filing penalties. It could include a fine of 20% of the owed amount plus 75% of the total tax due. These penalties are in addition to any unpaid taxes.
The Kerala Shop and Establishment Act 1960 intends to legalize businesses and safeguard the rights of employees. This law establishes the necessary guidelines for Kerala’s annual salaries, leaves, working hours, holidays, maternity leave, and other benefits.
Companies must register under this act to get a mandatory license to run a business successfully in Kerala. Companies must register following this act to obtain permission to run their businesses in Kerala well. This guide provides details on shop and establishment registration in Kerala. Keep reading to learn more.
Definitions
An establishment or administrative service where the employees are primarily engaged in office work, a hotel, restaurant, boarding or eating house, cafe or any other refreshment house, a theater or any other place of public amusement or entertainment, and any other establishment that the government may, by notification in the Gazette, declare to be a commercial establishment are all considered to be commercial establishments.
“Establishment” refers to a store or other place of business;
A shop is any establishment that engages in trade, business, or customer service. Whatever the location, it also includes any offices, storerooms, godowns, or warehouses used in connection with such sales or companies. However, it excludes commercial establishments and shops attached to factories where employees are entitled to benefits under the Factories Act of 1948.
Eligibility Requirements for Registration Under the 1960 Kerala Shop and Establishments Act
Every business establishment located in Kerala state territory is subject to this act. Every service, no matter how big or small, must register. Therefore, shop and establishment registration is necessary in Kerala for all retail stores, lodging facilities, restaurants, theaters, and public entertainment venues.
The Kerala Shops and Commercial Establishment Act Exempts Certain Establishments from Registration
This law contains some exemptions. The list is as follows:
Employees working in a management position in any establishment employees in management positions in the organization.
People who give services that involve traveling people who provide travel-related services.
Central or state government undertaking establishments for essential or state government undertakings.
Establishments under local authorities
Cantonment authorities and establishments under the Reserve Bank of India.
Shops and establishments in marketplaces where temporary fairs are occasional stores and businesses located in areas with frequent temporary fairs.
Establishments that do not fall under the Factory Act of 1948.
How do I register establishments and shops online in Kerala?
The steps that are required to register under the act:
Visit the official website of the Kerala government’s labor division as your first step.
After reading the relevant instructions, click “Proceed” after selecting the “Online Registration” tab.
Step 3 is to choose the district name and registration office after choosing the Kerala Shops and Establishments Act 1960.
Locate the key areas, which are:
Name of the company and the manager,
Name and mailing address of the businesses,
Name of the company and the kind of business
Number of males and females employes
Owner’s mobile number, etc.
Step 5: Download the format for the employee information, complete the fields, and click “apply.”
Step 6: Write down the temporary registration number and the application number.
Step 7 is to download the challan and make the necessary payment.
Step 8: Display and print the application using that temporary registration number.
Registration Paperwork for Kerala Shops And Commercial Establishments Act
To register, applicants must submit the following paperwork:
Details of the employer or manager.
The trust deed, partnership deed, or association documents.
Bank details
For rented shops, a rental deed is necessary.
Managers, directors, and officers.
Details of applicants’ PANs and Aadhaars
List of employees and their names, address, date of birth, workplace designation, and year of joining.
MOA or AOA
Certificate of incorporation
Registering Under the Kerala Shops and Commercial Establishments Act: Required Documents
The following fees need to be collected for applicants to register their stores and other businesses in Kerala:
No employees – Rs. 10
50 rupees for five workers
5-10 employees – Rs. 50
10-20 employees – Rs. 200
20-30 employees – Rs. 300
30-50 employees – Rs. 500
50-100 employees- Rs. 1000
Above 100 employees – Rs. 2000
Steps for Kerala Shops and Commercial Establishments to Check Application Status of Registration
You can check the status of your application using a straightforward process. These are as follows:
Step 1: Visit the official website of the labor department of the Kerala government.
Step 2 is to enter the registration number.
Step 3: Complete the captcha and select “show.”
Validity of Shop and Commercial Establishment Registration Certificates in Kerala
This registration certificate for a shop and commercial establishment in Kerala is valid for one year from the issue date. Applicants must apply for certificate renewal at least 30 days after the certificate’s expiration date.
Continue reading if you want to know how to renew your certificate.
How do I renew a shop license online in Kerala?
Applicants must renew their licenses every year. Otherwise, they may encounter difficulties in running a business. This renewal process is as follows:
Step 1: Go to the Kerala government’s official labor department website.
Step 2: Navigate to the portal and select “online renewal.”
Step 3: Go to the license renewal page by picking “online renewal.”
Step 4: Select “renewal of registration” as the renewal type.
Step 5: Review your license information in the following window.
Step 6: Next, select the period of renewal for the option.
Step 7: Download the employee’s details format, fill in the blanks, and next select the Browse tab.
Step 8: Finally, choose “apply for renewal.”
Kerala Shops and Commercial Establishments Act Rules
Here are some of the most essential rules for shops and commercial establishments in Kerala.
Employment of Women, Children, and Young People
This act prohibits children from working in shops or commercial establishments on the state’s territory. Women and minors under the legal limit of 17 are not allowed to work before or after 6 a.m. or after 7 p.m.
Working Hours
Employees should limit their work to eight hours per day and forty-eight hours per week. Working hours should be limited to ten per day, including overtime. Employees should not also work for more than four hours without a break.
Exemption of work
Pregnant women are exempt from working before delivery or for a specified period after delivery. They are also not permitted to carry loads while pregnant.
Regulations and Work
A company will not fire an employee who has been with them for more than six months without good reason.
Organizations must provide at least one month’s notice to employees who have not served for six months.
Employers must pay their employees’ average daily wages for the leave they receive.
Employers should pay holiday pay to employees who have served for at least a year.
Employers must keep a copy of the license in the shop or commercial establishment premises.
Week-off
Every store and commercial establishment should be closed at least one day per week. Shop owners should post this closing day in a visible area for customers. This day, however, should be changed more than once every three months.
Annual leave Paid
After 12 months of service, employees get access to 12 days of paid vacation. You can extend it for a maximum of 24 days. Furthermore, under Section 13 (2) (a), employees with wages are entitled to twelve sick days for accidents or sickness.
Employees’ Rights
Employees may request special leave for sterilization.
Casual leave for 12 days is allowed for employees with filled wages.
Employees may only put in fifty hours of overtime per quarter.
Employers should pay employees twice as much for overtime.
Penalties
There is a risk of being penalized if all rules and regulations do not apply correctly.
Breaking the rules of the Shop and Establishment Act can result in a penalty of $250 plus an additional 10 per day if the cause of the cost persists.
Any violation of sections 6, 8, 9, 11, 12, 13, 13A, 14, 18, 21, 21A, 22, 5D, 5E, and 5F are punishable.
The Advantages of the Shops and Commercial Establishment Registration Act in Kerala
The advantages of Kerala shop and establishment registration are listed below for convenience.
It serves as legal proof for the shop’s and establishment’s owners.
The registration certificate grants the right to operate any business within the state’s borders.
Applicants who hold this certificate are eligible to open a current business bank account.
The certificate holders can supplement the state government’s inspections.
Business owners who register under the act are eligible for government benefits for small businesses.
Save these details about shop and establishment registration in Kerala to start your business within the state. The procedures outlined in the guide will make it easier to complete the registration process.
Commercial and residential real estate brokers come from the same industry. The simple fact that both agents work in real estate is the only obvious similarity. The property type that each individual specializes in becomes the defining characteristic. Residential real estate agents assist clients with buying, selling, and renting property for their use.
On the other hand, commercial property agents handle real estate used for business or investment purposes. These agents advise investors on risk issues and ensure they get an ROI when they buy and sell real estate. They also lease properties, locate new spaces for their assets, and locate new areas for their client’s businesses.
Now, we have to consider several factors to elaborate on other differences. What skill sets do they possess first, for instance? What kind of transactions do they handle, what sort of property do they deal with, etc.?
Properties’ nature
One of the vital factors is the type of property. It covers topics like the number of housing units, the kind of building, the size, etc. You might need a commercial property agent when you want to buy or sell a property with more than four properties. Such transactions require commercial real estate loans, with stringent requirements and technicalities that may be challenging for a residential agent to complete. On the other hand, residential agents can complete transactions that do not require extensive
residential agents to complete. On the other hand, residential agents can complete transactions that do not require extensive commercial knowledge.
Skillset
Let’s start with the most fundamental factor in deciding if a residential agent can sell commercial property. Both residential and commercial agents must have specific skills to sell a property. Agents are expected to have perseverance, bravery, and strong communication skills. However, selling commercial properties necessitates a thorough knowledge of economic principles. Commercial agents work with properties that require them to understand concepts that residential agents might become familiar with, such as gross rent multiplier, cap rate, internal rate return, etc. However, commercial transactions may be made when residential agents are skilled in aspects of commercial property. Consider a residential agent with extensive knowledge of rent rolls, caps, and internal rates. They’re in a position to conduct business thanks to these skill sets.
Partnership
A residential real estate agent can sell commercial property by collaborating with a commercial agent. In addition to helping the client get the best rates, working with a commercial agent offers independent analysis.
Databases create an issue for qualified residential agents. Most commercial businesses maintain a database of available lease spaces. A residential agent may not, thus, have access to these “private” lease spaces.
Conclusion
Agents who specialize in residential sales may also be able to sell commercial properties in some circumstances. Nevertheless, depending on the type of property you are dealing with, it is advisable to select a knowledgeable agent. Choose a residential agent if the property is for personal use; commercial agents are better suited for dealing with commercial real estate. Working with an expert gives you value for money and service.