GST on House: Understanding Tax Rates & Benefits in 2025

In the present era, the Goods and Services Tax (GST) has impacted the real estate market. With its introduction, the tax structure has now been streamlined. Moreover, every real estate transaction is made under a single tax structure. This is applicable to commercial and residential properties. But, there are certain exemptions for under-construction properties. Apart from everything else, GST eliminates the cascading taxes and the complexity. So, scroll through to find more about GST on house in 2025. But, before moving ahead, let’s check more about ITC (Input Tax Credit).

What is Input Tax Credit?

ITC under GST allows businesses to reduce taxes they have to pay on purchases. This can be done by subtracting the GST they’ve already paid on other things. But, this benefit can’t be availed for properties bought for personal use. 

For instance, if a real estate developer has bought construction materials at a price of Rs. 20,00,000, then he can claim ITC. This figure can be calculated with 18% GST. Once he claims ITC (Rs. 36,000), it reduces the tax liability at the time of selling.  

Current GST Rates on Residential Properties

As of February 2025, GST on house purchases in India is applicable as follows:

• If a property is undergoing construction, then the tax is 5%. But, this rate can differ depending on the location and the property. Way ahead, real estate developers can claim ITC on the materials used during the construction phase. In that case, the homebuyer must check with the developer regarding the ITC benefits. This can eventually affect the property’s cost.
• GST is not applicable for ready-to-move properties. This is because such properties fall under completed goods. If the builder can’t present a completion certificate, then it means that the property is under construction. In such a scenario, GST will be applicable. But, real estate GST isn’t levied if the developer presents  a valid completion certificate.
• For apartments priced below Rs. 45,00,000, the GST rate is only 1%. This rate is reduced to support the “Housing for All” initiative. Besides, this rate is applicable if properties are built within a certain area. Eligibility for the tax rate requires 60 sq. m. carpet area. The property’s price must also not be beyond Rs. 45,00,000. But, in non-metropolitan cities, the property can be spread across 90 sq. m. area.
• If the flat’s price is more than Rs. 50,00,000, then the GST rate is 5%. Developers can also not avail themselves of the benefit of ITC. But, this rate is applicable when properties are under construction. The property tax rates are not applied for properties that have been built.

Tax Benefits for Homebuyers in 2025

Presently, the Indian government has introduced many home buying tax benefits. This has encouraged many individuals to invest in the real estate sector.

Increased Income Tax Exemption Limit

Under the new tax regime, the tax exemption limit has been increased to Rs. 12,00,000 per year. This change enables individuals to save more for home purchases. It can also reduce the burden while paying off a loan.

Tax Rebate for First-Time Homebuyers

If someone is buying a house for the first time, then he can benefit from an additional deduction. This is equivalent to a deduction of up to Rs. 50,000 per annum. This provision is also applicable to loans approved between April 1, 2019, and March 31, 2022. But, the stamp duty value must not be more than Rs. 45,00,000.

Tax Relief on Self-Occupied Properties

As per the Union Budget 2025, self-occupied properties are also eligible for tax exemptions. Homeowners can currently claim up to two properties as self-occupied. This thereby removes the tax liability on notional rental income. 

Reduction in Repo Rate

Just recently, the Reserve Bank of India has reduced the repo rate to 6.25%. Thus, homebuyers can take a home loan at a lower interest rate. They will not feel the burden of paying off the loan ahead. 

Exemptions and Special Cases

According to numerous sources, the real estate GST framework includes many exemptions. Regardless of whether or not the land is developed, the sale is exempted from GST. This norm applies even when the land has undergone infrastructure development. But, under the Joint Development Agreements (JDAs), GST implications on houses can be complex. The tax liability will then depend on the agreement’s nature. It can also depend on the type of property that is under development. Besides, the buyer has to bear stamp duty or registration charges separately. These are not considered under the GST framework.

Now, let’s check how GST can be calculated.

How is GST calculated?

Let’s say that you have purchased a flat worth Rs. 20,00,000. In such a case, the property falls under affordable housing and a 1% GST rate is applicable. 

Later, you have to find out the GST amount by multiplying the property’s price with the rate.

Now, you have to add the GST amount to the actual price. This will be equal to the total price of the house. 

In this case, the GST = Rs. 20,00,00 *  1% = Rs. 20,000.

Therefore, the total price of the house is Rs. 2,20,000. 

Key Considerations Before Buying a Home

There are numerous things that you must consider before buying a house. 

• First and foremost, you have to assess your budget and the capability of spending. At those instances, you have to factor in the property’s value, down payment, and monthly EMI payments.
• Now, you have to choose a location that suits your lifestyle. It should also be easier to commute to shopping areas, schools and hospitals. A good location can also impact the property’s value in future. 
• Before closing the deal, ensure that the property has clear legal titles. The property must also not be under any legal dispute. Way ahead, you must verify documents like the occupancy certificate and the title deed. 
• If you’re buying a newly constructed property, then research the developer’s reputation. While you seek more about the developer, ensure that he has met quality standards in the past. 
• While you decide to buy a house, consider various amenities. These can include a swimming pool, a gym, power backup and more.
• Soon after you start residing, understand the ongoing costs. These include property taxes, utility bills, and maintenance charges. 

Besides the above aspects, you must research the potential for value appreciation. As years pass by, the real estate market tends to fluctuate. Hence, it’s better to comprehend the trends before investing. 

Final Thoughts: Navigating GST in the Housing Market

Finally, it can be tricky to navigate GST in the housing market. This is because an individual has to understand the tax rates in 2025. For under-construction residential properties, the GST is set at 5%. But, for commercial properties under construction, the tax rate is 12%. A reduced rate of 1% is also applicable for affordable housing projects. Beyond this, the buyer has to bear stamp duty and registration charges. 

If you wish to relish opulence and luxury, then why not consider a house built by Goodbrick Realty? While we develop houses, we blend comfort and functionality. Every nook and corner of the indoor space is also thoughtfully designed.