It can be more expensive to register a property than to purchase one. If you intend to purchase a house, keep in mind that the price the seller quotes you does not necessarily represent the total amount you will have to pay.
Easily, a few lakhs get added to the price quoted to you when you’ll register it on your name. Did you know that you will be charged stamp duty and registration charges, cess, and surcharges when you pick up a property? Yes, all the charges put together can amount to 7% to 10% of the total market value of the property, or more. In most states in India, 5% to 7% of the total market value of the property is charged as stamp duty, while 1% is charged as a registration fee.
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What is Stamp Duty Value of Property?
When you’re transferring your property title to someone else, you’ll encounter a charge known as the stamp duty value of the property. This is a fee imposed by the state government for registering your property documents. It’s important to note that stamp duty and registration charges vary between states. Paying the stamp duty is a mandatory requirement under Section 3 of the Indian Stamp Act, 1899, when registering a property.
What are Registration Charges for Property?
Stamp duty value of property is a fee states charge based on the transaction value, while registration charge is what you pay for the service of recording a contract or deed in the government’s records. In simple terms, it’s like the government maintaining a document registry for a fee, giving legal weight to papers. The Indian Registration Act, 1908, outlines how this registration process should happen.
Who levies Stamp Duty in India?
Stamp duty value of property is divided under Union and State Lists in the Constitution. States, empowered by the Stamp Act, set stamp duties ranging from 3% to 10% of property value. Registration charges, mostly fixed by the central government, vary across states. These charges contribute significantly to state tax revenues and annual GDPs.
Who pays the Stamp Duty on a House?
The buyer is the one on the hook for both the stamp duty and registration charge. Interestingly, the law doesn’t explicitly state that the buyer must shoulder these costs, but in practice, buyers are responsible for covering these expenses.
Stamp Duty Concession for Ladies
To encourage women’s property ownership, some states apply lower stamp duty rates when a house is registered in a woman’s name. In Delhi, for instance, women buyers pay a reduced 4% stamp duty, compared to the 6% rate for men. Joint registrations with women as the primary co-owner also attract lower rates.
It’s important to note that not all states provide this benefit. In states like Kerala, Bihar, and Jharkhand, both men and women pay similar charges. In Uttar Pradesh, women enjoy a 1% discount on stamp duty, provided the property value doesn’t exceed Rs 10 lakh.
Stamp duty calculation
When calculating the stamp duty value of property, the transaction amount is the key factor influencing the stamp duty in property transactions. District administrations set a standard rate for land and property, below which transactions cannot be registered. Even if a property is purchased below this rate, stamp duty is calculated based on this standard rate. If the transaction value exceeds the standard rate, the stamp duty is calculated based on the actual deal value. For instance, if a property’s agreement value is Rs 50 lakhs and the ready reckoner rate is Rs 40 lakhs, the stamp duty is calculated on the higher value of Rs 50 lakhs.
Tax Benefit on Stamp Duty and Registration Charges of a Property
Regarding tax benefits, under Section 80C, homebuyers can claim a rebate on home loan principal payments and money spent on stamp duty and registration charges, up to Rs 1.50 lakhs annually. To qualify, buyers must show that they funded the stamp duty and registration amount from their own pocket, as borrowed money from other sources is not eligible. It’s important to note that stamp duty is non-refundable.
Capital Gains Tax and Stamp Duty
Even if a property is sold below its circle rate value, the owner is liable to pay capital gains tax based on the stamp duty value of the property. In 2017, the government introduced Section 50C in the income tax law to curb the use of unaccounted money in real estate. This section mandates that the stamp duty valuation becomes the basis for calculating capital gains under Section 48 if the sale consideration received is lower than the stamp duty valuation.
Section 50C underwent amendments in 2018 and 2020, stating that no adjustment for capital gains would be made if the variation between the stamp duty value and sale value is within 10%.
Does home loan cover stamp duty and registration charges for Property?
When purchasing a home, buyers need to fund stamp duty and registration charges independently, as banks don’t include these expenses in the property cost assessment. Typically, banks offer loans of up to 80% of the property value. However, their assessment methods may differ from the property’s selling price. For instance, if a property is priced at Rs 1 crore but the bank appraises it at Rs 90 lakh, the loan will be based on the lower value. So, even though the overall cost for a buyer in Delhi to buy and register a home valued at Rs 1 crore is around Rs 1.06 crore, the bank may only grant a loan of Rs 72 lakh, leaving the buyer to arrange the remaining amount along with stamp duty and registration charges.
Reason for Stamp Duty Evasion in India
In India, stamp duty rates are notably high, and the prevalent issue of stamp duty evasion is largely due to the limited legal weight associated with stamp duty payments.
Property registration papers merely signify the payment of a fee for specific purposes. To establish legal ownership in case of a dispute, property owners often need to provide additional evidence.
This lack of watertight legal proof discourages many buyers from registering their properties. Despite the high stamp duty rates, the process doesn’t provide the expected legal sanctity, leading to widespread instances of stamp duty evasion.
This, in turn, results in substantial losses for state governments.
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Factors Considered for Calculating Stamp Duty
When determining the stamp duty value of a property, several factors come into play, including:
- Location: Stamp duty varies for city, rural, metropolitan, or suburban properties. Properties within city limits generally incur higher charges.
- Owner’s Age: Some states offer discounts for senior citizens.
- Owner’s Gender: Certain states provide concessions for female property owners.
- Usage: Whether the property is for commercial or residential use impacts the stamp duty, with commercial properties facing higher charges.
- Type: Whether it’s a flat, independent house, etc.
- Amenities: In some states, like Uttar Pradesh, additional stamp duty may apply if the housing project offers high-end amenities like elevators, swimming pools, clubhouses, gyms, community halls, and sports areas.
Documents required for Stamp Duty and Registration
When it comes to registering a property and paying the stamp duty value of property, the buyer needs to provide various documents. These may include:
- Sale deed in the seller’s name
- Khata certificate
- BBMP extract certificate
- Tax-paid receipts for the last 3 months
- Registered development agreement (for Joint Development Property)
- Power of attorney (if any)
- Joint development agreement, GPA, and sharing/supplementary agreement between the landowner and builder
- Copies of all registered previous agreements (for resale property)
- RTC (Records of Rights and Tenancy Corps) or 7/12 extract
- Order of Conversion issued by the concerned authority
- Latest bank statements for the outstanding loan amount
- Certificate of encumbrance up to the current date
- Sale agreement
- Electricity bill
- NOC from Apartment Association
- Sanctioned building plan
- Occupancy/Possession certificate from the builder
- Title documents of the landowner
- Photocopy of Society registration certificate and Society share certificate
Procedure For Paying the Stamp Duty And Registration Charges
1. Physical Stamp Paper
- The traditional method involves purchasing non-judicial stamp paper from an authorized vendor.
- These papers have impressed stamps, and after purchase, transaction details are written/typed on them.
- Not widely preferred due to the difficulty in finding vendors and potential shortages, especially for higher stamp duty amounts.
2. E-Stamping
- Introduced to avoid counterfeit stamp papers and streamline the stamping process.
- E-stamping is done online, and in some states, it is compulsory.
- The Stock Holding Corporation of India Limited (SHCIL) is the official vendor, and transactions can be paid through various methods such as debit/credit cards, cheques, demand drafts, and online banking.
- E-stamp certificates are issued, and their authenticity can be verified online using a unique certificate number (UIN).
3. Franking
- Involves an authorized franking agent stamping the document to indicate payment of stamp duty.
- Before executing the transaction, approach an authorized bank or agent to deposit the stamp duty.
- A franking machine is used to affix a special adhesive stamp on the document.
- Minimum franking charges are prescribed, such as 0.1% of the agreement value in Bengaluru.
- This fee is adjusted against the stamp duty at the time of executing the sale deed.
It’s important to note that not all states offer all three payment options, so choose the method that suits your situation to pay the stamp duty value of property.
How to save on stamp duty charges?
When considering the stamp duty value of property, there are several strategies to save on costs:
- Registration in a Woman’s Name: Some states offer significant stamp duty discounts for female buyers. Purchasing property in the name of a female family member can lead to savings.
- Projects with Lower Amenities: Housing projects without premium amenities generally have lower stamp duty charges. Evaluate if premium facilities are necessary before investing.
- Rural Areas: In certain states, urban property buyers face higher stamp duty than those in rural areas. Opting for property outside municipal limits can result in cost savings.
- Affordable Housing Exemption: There is a demand for stamp duty exemptions in affordable housing. If implemented, buyers in this segment can save significantly.
- Builder Offers and Waivers: Some developers offer to waive the stamp duty value of property to boost sales. While this can be advantageous, carefully assess other aspects of the purchase to ensure transparency.
Stamp Duty and Registration Charges in Different States of India
Conclusion
Understanding the stamp duty value of property is key for homebuyers. Factors like registering in a woman’s name or choosing projects with fewer amenities can save costs. However, it’s crucial to note that stamp duty is not covered by bank loans, requiring buyers to arrange these funds separately. Being aware of these details helps make informed decisions in property transactions
Frequently Asked Questions (FAQ)
No, stamp duty paid is non-refundable.
Madhya Pradesh has the highest stamp duty charges in India, at 9.5%.
The stamp duty is one rupee per thousand rupees or part thereof of the value of shares in the national capital.
The registration price for a will is Rs. 600.
No, you do not need to pay stamp duty to register your will. You will simply have to pay the registration price.