Registering a home is more difficult than buying one. If you’re thinking about purchasing a house, keep in mind that the price the seller quotes you is not the ultimate price you’ll have to pay. When you register it in your name, a few lakhs are easily added to the price stated to you.
As per the constitutional arrangement, the stamp duty is levied and collected by the state government and consequently, it varies from state to state. Further, the stamp duty is dependent on the value of the property which in turn depends on other factors like type of the property (residential/commercial), the age of the property, property location etc.
Did you know that when you buy a house, you’ll have to pay stamp duty, registration fees, cess, and surcharges? Yes, the overall cost of the charges might be as much as 7% to 10% of the property’s total market value, if not more. In most Indian states, stamp duty ranges from 5% to 7% of the entire market value of the property, with 1% being the minimum.
What is Stamp Duty?
Stamp duty is nothing but a direct tax levied by the government and payable under section 3 of the Indian Stamp Act, 1899 on all documented financial transactions including bills of exchange, letters of credit, promissory notes, letters of credit as well as property transactions. A document on which stamp duty is paid is legally permissible and can be presented as evidence in the court of law.
Stamp Duty Rates
Since the stamp duty on property transactions is levied by the state governments, it varies from state to state. It usually varies between 5-8% of the property value. Additionally, you need to pay about 1% registration charge over and above the stamp duty but that again may vary state wise.
Stamp Duty Charges are determined by Several Factors
Age of the Property: The age of the property has a significant impact on the stamp duty rates you will have to pay. Because stamp duty is computed as a proportion of the overall market value of the property, historic structures normally have lower stamp duty rates than newer buildings. Because the market worth of historic buildings has decreased, this is the case.
- Owner’s Age
Almost every state government has reduced stamp duty for older persons. As a result, the owner’s age plays a significant influence in calculating the fee.
- Purpose:
Commercial structures have a higher stamp duty cost than residential constructions. This is due to the fact that commercial buildings require a large number of facilities, floor area, and security elements.
- Gender of the Owner:
Women in our nation, like older persons, obtain a stamp duty discount if the property is registered in her name. When it comes to getting their property registration paperwork stamped, males spend around 2% more than women.
- Location:
Prepare to pay a hefty stamp duty if your home is in a municipal region or an upmarket metropolitan district. If your property is in the Panchayat boundaries or on the outskirts of town, you will pay less to have it stamped.
The stamp duty shall be calculated on the basis of market value of securities which are subject to issuance or transfer, as the case may be.
How is Stamp Duty Charges Calculated?
If your property’s market worth is high, you’ll be charged a high fee, and vice versa. If the property has both market and agreement values, the highest of the two will be taxed.
The property registration fee and stamp duty costs are determined by the kind of property, location of the property, gender and age of the owner, usage of the property, and number of floors in the property, among other factors.
Stamp duty authorities typically utilise Stamp Duty Ready Reckoner to calculate the property’s value.
When is Stamp Duty payable?
Stamp duty is payable before the execution of transactions. one can also pay the stamp duty on the next working day of the date of execution of the transaction. Any further delay in the payment of stamp duty will attract a penalty at 2% per month upto a maximum of 200% of the remaining amount. Therefore, it is advisable that the stamp duty is paid in full and on time.
Who is responsible to pay Stamp Duty?
The stamp duty is paid by the buyer/transferee of the property unless there is an agreement to the contrary. In the case of a property transaction, however, both parties are equally responsible for paying stamp duty.
Is stamp duty required on all papers connected to the transfer of real estate?
Stamp duty is due on all transfer documents before registration, with the exception of wills, including agreements to sell, conveyance deeds, gift deeds, mortgage deeds, exchange deeds, power of attorney, tenancy agreements, and lease deeds.
Stamp Duty Tax Advantages
If you bought or built a home in the current fiscal year, you can claim an income tax deduction under section 80C for the stamp duty, registration fees, and any other expenditures linked to the property transfer. The current tax deduction threshold under section 80C is Rs. 1.5 lakhs.
Individuals and HUFs can both claim the tax deduction. The tax claim, however, must be filed in the same fiscal year that the residence is acquired or built. So, if you bought a property in November 2018, you may only claim a tax reduction for the fiscal year 2018-19. In case you have made a joint purchase of the property then the co-owners can claim for the tax deduction in the annual returns in proportion to their share in the property.
Procedure for Payment of Stamp Duty and Registration Charges
1. Physical Stamp Papers
Stamp duty and registration fees are traditionally paid in this manner. An authorised seller sells you non-judicial stamp paper. Paper with imprinted stamps is known as non-judicial stamp paper. The transaction information can be written/typed on the stamp paper once you have purchased it. It’s not simple to locate a dealer who sells these stamp sheets. Furthermore, such paper is frequently unavailable. If you have a lot of stamp duty to pay, you’ll probably need a lot of stamp papers. As a result, many people dislike this technique.
2. E-Stamping
You must go to the SHCIL website in order to conduct e-stamping. To find out if e-stamping is permitted in your state, choose it. You’ll receive information on the transactions that must be e-stamped as well as a list of collecting centres that will provide certificates to those who e-stamped. Fill out the application form and submit it together with the stamp duty payment to the collecting centre.
You may pay using debit cards, credit cards, checks, demand draughts, and internet banking, among other methods. The e-stamp certificate will be issued once you have paid the stamp tax. This certificate will have a unique certificate number (UIN) that includes the date of issue.
3. Franking
An authorised franking agency stamps your document to show that stamp duty has been paid. You should visit an authorised bank or a franking agency to deposit the stamp duty before you complete the transaction for which stamp duty must be paid (usually before signing the document). After paying the stamp duty, the document will be franked with a specific adhesive stamp using a franking machine.
What happens if you don’t pay sufficient Stamp Duty?
It is not legal to pay a lower stamp duty on your property. When you register your property, you are obliged by law to pay the appropriate stamp duty. Many individuals undervalue their home and claim a low market value in order to avoid paying costly registration and stamp duty payments. However, this is not recommended. If you are detected, you will be fined heavily and maybe imprisoned. If you’re a commercial builder, your reputation is also on the line.
FAQs
1. Are stamp duty charges refundable?
No, stamp duty charges are not refundable.
2. What shall be the basis of calculation of stamp duty?
The stamp duty shall be calculated on the basis of market value of securities which are subject to issuance or transfer, as the case may be.
3. What happens if you don’t pay stamp duty?
You have to pay the penalty of 2% per month on the deficit amount.
4. Can I claim stamp duty as tax deduction?
Yes, up to a limit of Rs.1,50,000, stamp duty can be claimed as a tax deductible under Section 80C of the Income Tax Act.
5. Whether stamp duty will be levied on Bonus Shares?
As per the new framework, the stamp duty is to be collected on market value which comprises of only price or consideration involved in the transaction. In case of issuance of bonus shares, no consideration/ price is involved and thus, no stamp duty will be levied.
6. What is the maximum exemption limit in stamp duty?
The maximum exemption limit in stamp duty is Rs. 1.50 lakhs.
7. Are stamp duty and registration charges covered by home loan?
Stamp duty and registration fees are typically not included in the amount of a house loan approved by a lender. The buyer is responsible for this out-of-pocket expense.