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If you are a customer investing in a property, you’d come across some different type of charges, EDC and IDC are some charges you will hear about. Here is an idea about what EDC and IDC are and why we are supposed to pay them.
So, first let us understand.
What are EDC AND IDC?
EDC & IDC charges are the charges that the government takes from the builders for development of the state and its infrastructure
EDC or External Development Charges are the extra charges collected from builders or developers by state government, for the development of roads, electrical works, water supply, sewerage, drains, necessary provisions of treatment and disposal of sewage, sullage and storm water, solid waste management and disposal, schools, colleges, hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and any other work to be executed in the periphery of or outside colony/area for the benefit of the colony/area
IDC or Internal Development Charges are collected from builders or developers by the government so that, they can develop major infrastructure project across the state. The IDC is that is collected by builders is invested in the state development fund, which is utilized for socio-economic growth and development of major infrastructure projects including national/ state highways, transportation projects, major water supply scheme and power supply projects etc.
Why do we have to pay EDC and IDC?
State government charges different kind development charges to builders like, scrutiny fees, Institution of land use, change of land use, license & permission fees and infrastructure charges. EDC and IDC charges are collected by the state, is used for the development of infrastructure in local areas and across sate.
Now we have an idea about what EDC and IDC let us understand how to calculate them
To, calculate EDC and IDC first we must understand what FAR is,
What is FAR?
FAR is Floor Area Ratio. FAR is the total floor area of the whole building, to the area of plot, it is used to calculate the maximum authorized built up area of a colony/township. Let's take an example, let’s say a plot measures around 20,000 sq. ft. and the FAR allowed for that area is 4, then maximum 80,000 sq. ft. area will be allowed to construct in all floor of the whole building put together. Different FAR values are there for different area under town planning scheme.
So in short, when FAR value is multiplied with the plot area it gives us the maximum floor area that be constructed for a building in a plot
FAR VALUE * PLOT AREA = Maximum floor area for the building in the plot
EDC and IDC CALCULATION
Let’s take for example FAR of HUDA that is 1.75
We know that
Step 1:FAR = 1.75
Step 2:1 acre = 43,560 sq. feet
Therefore, to calculate the total area that has to be built we need to
FAR VALUE X PLOT AREA = Maximum floor area for the building in the plot
Step3: Total area= 1.75 * 43560 = 76230 sq. feet
Let’s assume that the EDC rate per acre is 1,76.,28000
EDC rate per sq. = 1,76.,28000/ Total area
Step 4: EDC rate per sq. feet = 1,76.,28000/ 76230 = 231 per sq. feet.
Now, to calculate IDC
IDC is 10% of EDC
IDC = 231 x 10/100
= 23 sq. ft.
Therefore, total Charge is
EDC + IDC
Total = 254 per sq. feet.
Do You need to pay Service tax on EDC and IDC?
NO, you don’t have to pay service tax on EDC and IDC. Some builders may charge you EDC and IDC but that would be wrong, don’t let them rip you. Here is the thing EDC and IDC are already government taxes, so a person can’t charge tax on a tax. So, if a builder has already asked for service tax on EDC and IDC then you must probably ask for refund.
EDC and IDC are charged by the government to the builders or developers
EDC and IDC rate are fixed by the government, Different area authorities have different EDC and IDC rate
EDC and IDC are used by the government for developing the state and its infrastructure
To calculate EDC and IDC we need FAR (Floor Area Ratio)
FAR is FAR Stand for Floor Area Ratio. FAR is the total floor area of the whole building, to the area of plot,
Maximum floor area for a building in a plot = FRA value x Plot area
IDC is 10% of EDC
NO service tax is applicable on EDC and IDC