Apart from the equated monthly installments (EMIs), you would need to pay other taxes like maintenance fees and garbage tax when you own a property. These costs need to be considered since they are over and above your EMIs.
Here it is important to understand the difference between taxes paid to the local authority and charges to be paid for maintenance.
Municipal Taxes
“Municipal taxes levied by the local authorities, like garbage taxes can only be claimed as deductions for calculating the gross annual value of a house property if they are actually paid by the property owner during the financial year. If these taxes are paid by the tenants, the owner cannot claim this deduction. Contributions received by Resident Welfare Associations (RWAs) will not be available as a deduction,” says SR Patnaik, partner (head - taxation), Cyril Amarchand Mangaldas. So, you can claim this deduction only if you are residing in your property.
However, it is important to note that maintenance charges payable to the resident welfare associations (RWA) do not fall under the classification of municipal taxes and, therefore, will not be eligible for deduction while calculating the taxable value of the rent.
GST Laws
“Under Indian GST laws, RWAs are required to take a GST registration and collect the GST if the monthly subscription/contribution charged from their members is more than Rs 7,500 per member. Mere collecting and maintaining any security deposit for maintenance does not amount to consideration and would not attract GST,” says Patnaik.
However, in certain cases, a higher payout needs to be made. “Residents in GST-registered RWAs may be required to make a higher payout on account of GST if it is payable, which has a direct financial impact on residents. RWAs can get an input tax credit (ITC) on the GST they pay for things like repairs, equipment, and maintenance services,” says Darshan Bora, partner, Economic Laws Practice.
However, it should be noted that since GST would be payable on the entire monthly maintenance contribution from members, it may cancel out those savings of ITC.
