Cancellation of a property deal could be because of various reasons, such as non-receipt of necessary documents, or personal reasons like marriage or relocation. In such cases, do you get back your money from the seller? Read this article to know the answer
Not all property deals make their way through. Some deals get cancelled mid-way for several reasons, including lack of funds, legal issues and even an untimely demise. Let us see if you can get back your token money, stamp duty, and GST if you cancel a property you booked.
Can You Get Back the Token Money Paid?
Once the buyer and the seller fix the terms and conditions of the Customer Property deal, they exchange some cash as a sign of good faith between the parties involved. On successful verbal agreement between a buyer and a seller, the first transaction a buyer typically makes is the payment of token money, which depicts their intention to go ahead with the sale.
The token amount paid varies according to the property’s size and location and as per the terms and conditions laid out by the seller. Suppose the seller backs out from the deal. In that case, the buyer may file for a compensatory suit and demand that they get refunded the money they lost in the transaction. In certain property cancellations, individual sellers demand hefty token money, which the buyer pays.
What Are the Tax Issues Related to the Token Money?
Per his well, a seller may decide not to forfeit the token money paid beforehand if a buyer backs out. While in other cases, the seller may choose otherwise. The buyer has no right to any tax benefit for the amount paid, as it comes under the capital loss bracket under tax laws.
However, if the seller confiscates the money, it becomes the seller’s income for that fiscal year and is taxable. Such money comes under the income bracket from other sources. It is not taxable as capital gains, though the money comes from a capital source such as a property asset. You need to Know about the Online Property Registration and Refund Process in detail from Experts in Real Estate Industry.
Can You Get the Refund of the Stamp Duty Paid?
When a property changes hands, a type of property tax called stamp duty has to be paid. The tax came into being from enacting the Indian Stamp Act of 1899: https://legislative.gov.in/sites/default/files/A1899-2.pdf
For most property transactions, the buyer pays some money as stamp duty, and this may be a fixed amount or maybe a percentage of the total value of the asset being bought. Specific registration fees and other service charges also need to be paid to complete a registration or property deal.
The respective state governments under whose jurisdiction the property falls decide upon such fees. Hence, the refund laws regarding stamp duty also vary from state to state. For instance, In Maharashtra, on cancellation of a real estate deal, the state government allows two years to claim the refund of the stamp duty paid.
However, a refund of stamp duty can be claimed only if the developer does not deliver the possession of the property booked. The cancellation of the agreement has to be registered as per the law for the refund to be accepted and approved. The buyer can get up to 98% of the stamp duty as a refund.
The person has to attach the original registered agreement and the originally registered cancellation deed along with the refund application. Buyers will not get any refund on their registration fees under any circumstances.
Can You Get a Refund of the GST Paid?
Based on the current law, developers charge GST on agreements for under-construction. Booking and buying of construction property require the payment of a specified amount as the prescribed GST Payment levied on the agreed value and is a fixed percentage of the property’s market value. The determining factor for the GST rate is whether the property the buyer intends to purchase comes under the affordable housing segment.
The refund of GST in case of cancellation of property booking will depend on the builder of the property and the demand dynamics at that time.
The seller may refund the booking amount if a deal does not go through and gets abandoned mid-way. If GST has been collected, he may or may not agree to repay this amount, depending on whether the builder has already deposited the credit to the government.
For instance, in 2009, people who invested in the New Town Heights project in Gurgaon joined hands and pressurized the builder, DLF, to either complete the project or hand them their refund.
When a deal falls through, a buyer has limited options. Buyers can choose to take the seller to court, but that might take years to resolve the case, or they might accept their fate. These solutions do not benefit the buyer, so being aware of such refund policies is important.
Note These Before You Cancel a Property Deal
There are some things you must ensure before you cancel a property deal:
- Cross-check the sale deed before signing it
- Provide a valid reason for exiting the deal
- Try to shift the purchase to another property of the same builder
- Network with other buyers to build pressure
- Ask for a cancellation agreement
- Never pay in cash
- Always ask for a receipt
Conclusion
Buying a house requires a lot of thorough deliberation and sorting out finances and paperwork. Amidst all these hassles, many home buyers do not get complete information about what would happen if the deal does not make through. That is why it is important to do thorough research or take guidance from real estate experts at Vakilsearch to invest your hard-earned money correctly.
FAQ
What is the refund process for a cancelled property deal?
The refund process for a cancelled property deal depends on the specific circumstances and the stage at which the cancellation occurs.
Can you explain the mechanism for money reimbursement in the event of a cancelled real estate transaction?
In the event of a cancelled real estate transaction, the refund mechanism depends on the specific case and the reasons for cancellation. The refund amount may be paid through electronic means, such as a bank transfer or online payment, to the buyer's designated bank account.
How is the refund handled when a property deal falls through?
When a property deal falls through, the refund process depends on the specific circumstances and the reasons for the cancellation. Generally, the buyer needs to submit a cancellation deed and the original property sale agreement to avail the refund.
What are the steps involved in getting a refund after canceling a property transaction?
After cancelling a property transaction, the buyer needs to submit a cancellation deed and the original property sale agreement to avail the refund. The refund process may vary depending on the specific case and the reasons for cancellation.
In the context of a cancelled property deal, what is the protocol for the return of funds?
The protocol for the return of funds in a cancelled property deal depends on the specific circumstances and the reasons for cancellation. Generally, the buyer needs to submit a cancellation deed and the original property sale agreement to avail of the refund.
Can a property sale agreement be Cancelled?
Yes, a property sale agreement can be cancelled under certain circumstances, such as non-compliance with agreed terms, project delays, legal disputes or any other breach of contract by the developer.
Is stamp duty refunded if the purchase falls through?
Stamp duty may be refunded if the purchase falls through due to valid reasons recognized by the state government, such as non-compliance with agreed terms, project delays, legal disputes or any other breach of contract by the developer.
What happens if I cancel my flat booking?
If you cancel your flat booking, the refund process depends on the specific circumstances and the reasons for cancellation. Generally, you need to submit a cancellation deed and the original property sale agreement to avail the refund.
Is the Supreme Court refunding stamp duty?
The Supreme Court has not directly refunded stamp duty in cases of cancelled property deals. However, it has directed developers to refund the amount paid by buyers in such cases.
How can I get refund from Challan?
To get a refund from Challan, you need to submit a request to the appropriate authority, such as the Real Estate Regulatory Authority (RERA) or the consumer court, depending on the nature of your case. Provide all necessary documents, such as the property sale agreement, cancellation deed, and proof of payment, to support your case.
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