In India, homebuyers must pay stamp duty at the time of property registration. Nearly 3-8% of the transaction value (exact rates depend on the state of residence), stamp duty significantly increases a homebuyer’s monetary burden. Also, if you fail to pay stamp duty, you have to pay the outstanding amount along with a penalty of 2% of the outstanding amount per month. The penalty could go to as high as 200% of the original liability. While there is no scope for any evasion, there are severally legally safe methods to lower this additional cost to some extent. This article lists six such ways to do so.
What is stamp duty?
Stamp duty is a tax levied by states in India on property transactions. This tax must be paid by the buyer to the state government through the office of the sub-registrar at the time of property registration. Along with the stamp duty, an additional tax called registration fee must also be paid in lieu of the documentation. Since states are responsible for levying this tax, rates differ from one state to another.
Stamp duty in key Indian states in 2024
| States | Stamp duty (as percentage of transaction value) |
| Andhra Pradesh | 5% |
| Arunachal Pradesh | 6% |
| Assam | 6% |
| Bihar | 6% |
| Chhattisgarh | 5% |
| Goa | 3-6%, based on transaction value |
| Gujarat | 4.90% |
| Haryana | 5-7% depending on area |
| Himachal Pradesh | 6% |
| Jharkhand | 4% |
| Karnataka | 3-5%, based on transaction value |
| Kerala | 7% |
| Madhya Pradesh | 8% |
| Maharashtra | 3-6% based on transaction value |
| Manipur | 4% |
| Meghalaya | 9.90% |
| Mizoram | 5% |
| Nagaland | 8.25% |
| Odisha | 5% |
| Punjab | 7% |
| Rajasthan | 6% |
| Sikkim | 5% |
| Tamil Nadu | 7% |
| Telangana | 4% |
| Tripura | 5% |
| Uttarakhand | 5% |
| Uttar Pradesh | 7% |
| West Bengal | 3-5% based on property value |
| Delhi | 6% |
Legal methods to save on stamp duty payment
The registration law of 1905 and the Indian Stamps Act make it mandatory to register property documents like conveyance deed, title deed and gift deed, etc. Aside from the fact that it is a legal necessarily, payment of stamp duty is also important to avoid penalties. The law provides for a penalty of up to 10% of the liability in case of stamp duty evasion. You will also not be able to use unstamped property documents as evidence in a court of law in case of a future dispute. While non-payment of stamp duty is not an option, there are legally safe ways to cut down on stamp duty on property purchases in India.
1. Get sale deed registered in the name of a woman
Barring some exceptions, nearly all states in India offer discounts to women homebuyers. In the national capital Delhi, for instance, women buyers have to pay only 4% stamp duty as against the 6% rate for male buyers. You may consider registering the property in the name of a woman in the house to avail of this benefit.
Availing of this discount is also possible if the property is being co-registered in the name of a woman even though the discount in this case may be lower.
Caution
Property acquisition is a highly personal and complex matter. Choose this option only if you don’t foresee any legal troubles about title ownership and its misuse in future.
2. Pay stamp duty based on circle rate/guidance value
Circle rates are the government-determined value below which you can’t register your property. This is the benchmark used to calculate the stamp duty. Since the circle rate in some cases may be lower than the market rate of the property, you may consider registering your property based on its circle rate value.
Suppose, your property cost you Rs 1 crore because the market rate is high in the locality than the government-prescribed circle rate. If calculated based on the circle rate value, the cost of the property works out to be only Rs 80 lakh. Thus, you are legally safe in registering the property on circle rate value. Supposing this property is in Delhi, a woman buyer would pay Rs 3.20 lakh (4% of property value) as stamp duty. If she were to register the property on the purchase value of Rs 1 crore, she would have to pay Rs 4 lakh.
Caution
Registering property on a circle rate also means lowering the value of your property on paper. This means that if sell this property in future, you may not be able to demand, say Rs 1.20 crore, for a property registered at Rs 80 lakh a couple of years ago. Also, doing so would means applicability of capital gains tax at a higher rate.
3. Appeal for market rate determination
Sometimes the market rate of the property may be lower than the circle rate. However, since the law obliges you to pay stamp duty on circle rates only, you may be forced to pay higher stamp duty for a property of lower value. However, there is a way out of this scenario.
Section 47 of the Indian Stamps Act allows buyers the freedom to file an appeal with the sub-registrar to review circle rates in case the market value of a property is lower than circle rates.
“When any bill of exchange or promissory note chargeable is presented for payment unstamped, the person to whom it is so presented (sub-registrar), may affix, thereto, the necessary adhesive stamp and, upon cancelling the same in manner, hereinbefore, provided, may pay the sum payable upon such bill [or note] and may charge the duty against the person who ought to have paid the same or deduct it from the sum payable, as aforesaid and such bill [or note] shall, so far as respects the duty, be deemed good and valid,” reads Section 47.
Caution
Pending your appeal, the property will remain unregistered. In case the sub-registrar is not convinced, you may end up paying the old stamp duty as well.
4. Register under-construction property at lower undivided share
In the case of an under-construction property, a buyer pays stamp duty based on the construction cost and his undivided share in land on which the structure stands.
In Karnataka and Tamil Nadu, for instance, buyers of under-construction properties pay the stamp duty in two parts. First, the property is registered in the name of the buyer, based on his undivided share (UDS). Showing a lower UDS would, thus, mean lower stamp duty. On project completion, the property is registered for the second time, calculating the stamp duty for the entire property value.
Caution
Doing so would mean taking a monetary hit if you were to sell this property. This is a permanent depreciation you may be inflicting on your property.
5. Make use of state-specific rebates
A buyer undertakes long research for future purchases. Studying the local stamp duty law may be a good idea because there are state-specific benefits that can be availed of at the time of property registration.
In Uttar Pradesh, for instance, the stamp duty on property transfer with a family has been capped at Rs 7,000 (Rs 6,000 as stamp duty + Rs 1,000 towards processing fees). In Maharashtra, property transfers within a family attract only Rs 200 stamp duty even though the government is in the process of re-evaluating this provision to increase revenue collection.
Caution
Such rules may typically be more gift- and will-centric rather than real transaction-centric.
6. Avail of tax benefits on stamp duty
You can make savings at the time of income tax liability discharge. Under Section 80C of the income tax act, a buyer can claim a Rs 1.50 lakh deduction against stamp duty and registration charge payment on property purchases. In the case of joint owners, each one can claim this deduction proportionate to his share in the property.
Caution
Only individuals and HUFs can claim this deduction. This deduction can be claimed only in the year in which the stamp duty and registration charges were paid. For example, if you bought and registered the property on October 20, 2022, you can claim the deduction in FY2023 (April 2022 to March 2023 ).
Legal point of view
Legal experts are of the view that once must never under-value their property at the time of registration only with an aim to save money in stamp duty payment. This, they say, can have far-reaching legal and monetary consequences.
For one, if you decide to sell an under-valued property, you will find it extremely hard to find a buyer who will be willing to pay the fair value for your property. Even if that works out somehow, you as a seller will end up paying a lot of taxes as capital gains.
If a property worth Rs 1 crore is registered at Rs 80 lakh in 2005, and then sold for Rs 1.5 crore in 2010, the seller would make a profit of Rs 70 lakh—20% of this amount (Rs 14 lakh) must be paid as taxes. If the property were not undervalued at the start, the owner will pay 20% of Rs 50 lakh as the long-term capital gains i.e. Rs 10 lakh.
FAQs
How much stamp duty do I have to pay on a property purchase?
Stamp duty rates on property purchases could range between 3-10% in India. The exact rate would be decided by the state of residence.
What factors determine stamp duty rates?
Stamp duty rates are decided by the property value, the location of the property and the state-specific stamp duty law.
What are circle rates?
Circle rates, also known as the guidance value of ready reckoner rates, are the government-determined benchmark rates below which a property can’t be registered in state records.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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