Among the many additional costs that a buyer has to pay on property purchase in India, is stamp duty. This is the amount that a property buyer has to pay, in order to register the documents in the government records that act as a proof of their ownership over the asset. As stamp duty payment plays a crucial role in concluding a property transaction, buyers must know important facts about this levy.
See also: Laws related to property registration in India
Legal obligation
Paying stamp duty on property transactions is mandatory under Section 3 of the Indian Stamp Duty Act, 1899. Apart from being legally obliged to pay stamp duty on property purchase, doing so is also important for a buyer to establish legal ownership over the asset. Paying off the stamp duty is the first step towards getting your property legally registered, failing which the registration process can be impacted.
Parties involved
Since land is a state subject, the rules and regulations governing stamp duty charges are formulated and revised by the state governments. States are responsible for levying stamp duty on property purchases. They also periodically revise these charges, to make property affordable for buyers or increase revenue. Hence, the money that buyers pay as stamp duty, goes into the state exchequer. The buyer is responsible for paying the stamp duty on property purchases.
Stamp duty rates
In India, stamp duty charges vary between 3% and 10% of the property value across states. This means, for a property worth Rs 50 lakhs in Delhi, the applicable stamp duty is 6% and so, the buyer has to pay Rs 3 lakhs. The charges may also vary, depending on your gender.
Additional charges
In some states, the property registration process might entail additional charges alongside the stamp duty. This might include a separate registration fee, amounting up to 1% of the total value of the property.
Stamp duty rates for women
If the property is registered in a woman’s name, exemptions are offered by several states, on stamp duty charges. In Delhi, women home buyers have to pay only 4% of the transaction value as stamp duty, while the charges are 6% for men.
Applicable discounts
Developers sometimes offer home buyers a complete waiver of stamp duty payments, as part of festive offers. This does not mean that the payment does not have to be made at all. It only means that the builder is willing to make this payment on his own.
Documents required
It is essential for the buyer to have the relevant documents in place while paying the stamp duty in order to avoid procedural hassles. The main documents required in the process include the sale deed and other documents related to the property in question, as well as the identity proofs of the buying and selling parties.
Penalty
As the payment of stamp duty is mandatory under Section 3 of the Indian Stamp Duty Act, failure to register your property attracts a penalty. Typically, you have to pay the outstanding amount, along with a penalty of 2% interest accumulating per month. The penalty could go to as high as 200% of the original liability.
Loan eligibility
Since stamp duty considerably increases the cost of property purchases, the RBI has urged banks to include stamp duty value while calculating the borrowers’ loan to value ratio (LTV). LTV is the ratio of the loan amount to the value of the property.
Online payment
In order to simplify the stamp duty payment procedure, several states currently offer online stamp duty payment services including Delhi, Maharashtra, Karnataka, Jharkhand, Telangana, etc. Buyers in these and many more states, can now pay stamp duty online to register their property.
Tax deductions
Deductions can be claimed under Section 80C of the Income Tax Act on stamp duty and registration charges paid on the purchase of a home, under the overall limit of Rs 1.50 lakhs per annum. This claim can, however, be made only in the year when the property is purchased.
FAQs
What is the importance of stamp duty in property transactions?
The stamp duty legally validates the property’s transaction and establishes the buyer’s ownership, without which the buyer cannot get the property registered or have any legal claim over it.
Who is legally responsible for the payment of stamp duty?
The onus of paying the stamp duty during property purchase lies on the buyer.
How are stamp duty rates determined?
While stamp duty rates vary from state to state, they generally range between 3% to 10% of the property value, and might also differ based on factors like gender of the buyer.
Does the stamp duty entail any hidden charges?
Alongside the stamp duty, the property registration in some states might also require the buyer to pay a registration fee amounting up to 1% of the property’s value.
Are there any concessions on stamp duty for women?
Concessions on stamp duty for female buyers are offered by several states, such as Delhi, where women buyers have to pay 4% stamp duty as opposed to the regular 6%.
What are the penalties for not paying stamp duty?
Failure to pay stamp duty can attract a penalty of 2% interest per month on the outstanding amount, potentially reaching up to 200% of the original liability.
Can stamp duty be paid online?
Yes, several states offer the facility to pay the stamp duty online, including Delhi, Maharashtra, Karnataka, Jharkhand and Telangana.
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