Selling your property?
Before you celebrate the incoming funds, it’s crucial to understand the various costs involved in selling a property in India.
Many first-time sellers overlook these costs, only to be surprised later during the registration or income tax filing stage.
Let’s break it down.
📜 1. Capital Gains Tax (Long-Term or Short-Term)
One of the biggest costs you’ll face is capital gains tax, which is levied on the profit earned from selling your property.
There are two types:
🟢 Long-Term Capital Gains (LTCG)
- Applies if the property was held for more than 24 months
- Taxed at 20% with indexation benefit
- Indexed cost = Original purchase price adjusted for inflation
- You can save tax by reinvesting in another residential property (Section 54) or capital gains bonds (Section 54EC)
🔴 Short-Term Capital Gains (STCG)
- If held for less than 24 months
- The gain is added to your income and taxed as per your income tax slab
✅ This is a mandatory cost and must be calculated carefully.
📑 2. Legal Charges
Selling a property requires proper documentation:
- Drafting a sale agreement or sale deed
- Reviewing chain of title documents
- Legal verification and title clearance
💼 Hiring a property lawyer ensures the transaction is clean and reduces the risk of post-sale disputes.
💰 Estimated Legal Fees: ₹10,000 – ₹50,000+ (based on complexity and location)
🧾 3. Stamp Duty & Registration Charges (If Seller Bears It)
Usually, the buyer pays stamp duty and registration fees, but:
- Some buyers negotiate that the seller bears partial or full registration cost
- In some joint venture cases, the seller may need to register a partition deed or relinquishment deed, which also incurs stamp duty
⚖️ Know your agreement terms clearly before agreeing.
💼 4. Brokerage or Agent Commission
If you engage a real estate agent or broker, they typically charge:
- 1% to 2% of the total sale value
- This can be negotiated depending on market conditions and location
📌 Note: There’s no fixed rule on brokerage, but get a written agreement with the agent before finalizing.
🏦 5. Home Loan Foreclosure Charges (If Applicable)
If the property has an active home loan:
- You must pre-close the loan before selling
- Most banks don’t charge foreclosure penalty on floating rate home loans
- But fixed-rate loans may attract up to 2% penalty on outstanding balance
You’ll also need a loan closure certificate and NOC from the bank.
🧮 6. TDS Deduction (If Buyer Is Paying More Than ₹50 Lakhs)
Under Section 194-IA of the Income Tax Act:
- Buyer must deduct 1% TDS if the sale price exceeds ₹50 lakhs
- This 1% is deposited with the Income Tax Department
- You can claim this as credit when filing returns
✅ Ensure that TDS is deposited using your PAN and Form 26QB is filed.
🧹 7. Miscellaneous Expenses
These may vary but can include:
- Society No Objection Certificate (NOC) fees
- Pending maintenance dues
- Utility bill clearance (electricity, water, etc.)
- Mutation charges if applicable
- Cost of obtaining Encumbrance Certificate, tax receipts, etc.
- Photography or listing charges (if selling online yourself)
These seem minor but add up quickly.
✍️ 8. Property Valuation (Optional But Useful)
If you want a formal valuation (especially to assess capital gains):
- You may hire a government-approved valuer
- Helps with income tax documentation and buyer negotiations
💰 Typical fees range from ₹5,000 to ₹25,000
📉 9. Discount or Renovation Costs (If Required)
Sometimes, sellers spend on:
- Minor home repairs or renovations
- Deep cleaning or painting to attract buyers
- Offering discounts to close faster
While not compulsory, this can impact your net takeaway from the sale.
🧠 Pro Tip: Plan These Costs in Advance
Here’s a quick checklist of potential costs:
✅ Capital Gains Tax
✅ Lawyer’s Fees
✅ Broker Commission
✅ Foreclosure Charges
✅ Stamp Duty (if any)
✅ TDS (1%)
✅ Society NOC / Utility Clearance
✅ Document Retrieval Charges
🔁 Each deal is different. It’s wise to consult a property lawyer and a tax expert before closing.
📣 Call to Action
Planning to sell your property in India?
We offer end-to-end legal services for property sellers, including:
- Legal document review
- Drafting of sale deeds and agreements
- Title verification
- Capital gains tax consultation
- Coordination with buyer-side lawyers
📧 Email: ranjinijayaram@rjpropertylaw.com
📞 Call: +91 80884 17193
🌐 Visit: www.rjpropertylaw.com
✅ Sell smart. Sell legally. Sell with peace of mind.