GST on Home Loan – A Comprehensive Guide for Home Buyers
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Today, home loan interest rate is reduced, and home loans are easily available. More people than ever before are looking for home loans to help their dreams of owning a home come true. But it’s also important to understand the impact of the GST (Goods and Services Tax) on home loan and EMIs.
GST Impact On A Home Loan
When taking a housing loan, you need to pay interest on the principal amount. It is the amount you take as loan, and there is no GST or service tax applicable. Likewise, the stamp duty charges associated with home loan documentation also remains the same and not liable for GST.
Besides the cost of your home loan, you need to pay charges like advocate fees, processing fees, valuation charges, etc. to the bank.
Under GST for home loan services, you now need to pay 18% tax, which was previously 15%. It is a one-time additional charge that incurs a marginal increase (3%) on the home loan. Here’s the detailed illustration:
Suppose you have taken property loan of INR 30 lakh:
Processing Fee = 0.25% – 1% of INR 30 lakhs = INR 7,500 – 30,000
Before GST = 15% (service tax) on INR 7,500 – 30,000 = INR. 1,125 – 4,500
After GST = 18% on INR 7,500 – 30,000 = INR 1,350 – 5,400
Marginal Effect = INR 225 – 900
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As mentioned in the example here, there is only a marginal increase in your home loan cost after GST. The processing fee will be 1% of the loan value, and it’s capped to values like INR 10,000 or 20,000. This will differ from person to person, depending on the applicant’s profile, type of loan and income.
However, fixed home loan interest rate will now be subjected to 18% GST instead of 15% service tax. It is best to calculate your interest, EMIs and GST on the home loan calculator India before applying for the loan.
GST On Under-Construction Property
As per the revised order from the Indian Government, under-construction properties are liable to be taxed at 18%, including 9% CGST and 9% SGST. The Government also enabled deduction in one-third land value equivalent of the total principal amount charged by the developer. It makes an effective tax rate of about 12%. But the difference in cost is marginal, and you also get to pay lower EMI costs, which is good news for anyone.
GST On Ready-To-Move-In Buildings Or Properties
According to the new tax laws, after receiving the occupancy certificate for a project, there is no need to pay GST. Under the GST regime, a buyer wanting to purchase property does not have to bear the tax burden in this case.
Will GST Increase Your Home Loan EMI?
Well, combined with the double taxation system, which includes GST and Stamp Duty, the price of home loan EMIs has increased to some extent. But the rise is marginal. So, one can easily pay off the EMIs for a home loan without feeling burdened with GST.
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