India has the third highest taxation burden in the world when it comes to selling commercial property, after Norway and Malta, according to a study conducted by Taxand, an independent global tax advisory. The study, conducted across 23 countries measures the total incidence of taxation for various categories of real estate, taxes to develop and sell commercial property will swallow up 21.17% of the value in Norway, 18.93% in Malta and 15.5% in India.
However, the taxman takes away more if you rent commercial property – the total incidence of tax if you rent out offices adds up to 24.86%, a global average. Similarly, in the residential segment, the research finds that renting a standalone home has a tax burden of 36%, while selling one has a tax rate of 16.88%. Selling flats have a tax rate of 14%. Comparatively, China has one of the highest global tax rates for rental homes, at 50%, but is about the same as in India for other asset classes.
Overall, Indian real estate taxation rates follow the global median — “India has a high rate of tax owing to the high VAT/transfer tax rate of 10% on sale and also the income-tax rate of 34%. Once the Goods and Service Tax (GST) regime is introduced in India, the overall tax is expected to come down, “said Keith O’Donnell, head of real estate for Taxand.
The idea of doing a global study using an independent index that is to identify potential areas of over-valuation among asset classes, said Keith O’Donell, head of real estate for Taxand. While countries like Norway and Netherlands tend to top tax tables in many asset classes, Romania has some of the highest rates globally for residential property, and the US has higher rates for rentals as compared to sales.
Taxand is a global organisation of tax advisors which works in 50 countries, including through its associates BMR in India, and specialises in advising multinationals about international taxation.
