When purchasing a resale flat in India, many homebuyers wonder if they’ll have to bear the same costs as those buying new properties—especially when it comes to stamp duty and registration fees. While resale flats often come with advantages like immediate possession and established neighbourhoods, it’s important to understand the legal and financial obligations involved in such transactions. This article explores whether stamp duty applies to resale flats, what the law says, and how these charges compare with those for new properties. Understanding these aspects will help you make informed decisions and avoid any surprises during the homebuying process.
What is stamp duty?
Stamp duty is a tax imposed by the state governments in India on various legal documents, including property transactions. When you buy or transfer ownership of certain assets, such as real estate, stocks or other valuable items, you are required to pay stamp duty to legalise and formalise the transaction. The amount of stamp duty is usually a percentage of the transaction value or a fixed amount. Stamp duty varies from one state to another.
The purpose of stamp duty is to validate and authenticate legal documents, ensuring that they are legally binding. Stamp duty is a major source of revenue for states. Common documents on which stamp duty is levied include sale deed, sale agreement, lease, gift deed, power of attorney, etc.
For homebuyers, it is essential to be aware of the prevailing stamp duty regulations when engaging in any transaction that requires the execution of legal documents.
What is registration fee?
Paid along with the stamp duty, registration fee is a tax imposed by the government for officially recording and validating legal documents, typically related to property transactions. When you register a document, it becomes a part of the official public records, providing legal recognition to the transaction. The fee is payable at the time of registering these documents with the sub-registrar or registrar of assurances.
The registration fee is separate from the stamp duty. While stamp duty is calculated as a percentage of the transaction value, registration fee is generally a nominal charge that covers the cost of maintaining public records.
What is a resale flat?
A resale flat is a term used for a previously occupied property that is being put up for sale by its current owner. When compared to an under-construction property, a resale flat has already been lived in or used by a previous resident. When someone decides to sell their existing home, and another individual purchases it from them, it is considered a resale transaction.
Stamp duty on resale flats
Section 3 of the Indian Stamp Act, 1899, makes it mandatory for the parties involved in the process to pay stamp duty on sale deeds. So, a sale deed, irrespective of whether it is being executed for an under-construction property or a ready-to-move-in flat or a flat in the secondary market, must be registered. Thus, a buyer has to pay the applicable stamp duty and registration charges in his state, irrespective of whether it is an upcoming project or an old property as long as a sale deed is executed.
If you are buying a house in Delhi that will be ready for possession, say, in two years, you will pay 6% as stamp duty and 1% as the registration charge on the purchase. The charges remain the same if you buy a property from the resale market. The same remains true for ready-to-move-in flats available with builders.
See also: 11 facts about stamp duty levied on property purchase
Key points to know about stamp duty on resale flats
When buying a resale flat—i.e., a property that has been previously owned—buyers are required to pay stamp duty as per the applicable laws in their state. This government-imposed tax is essential to formalise property transactions. Below are important aspects to keep in mind:
- Variable Rates: Stamp duty on resale flats is not uniform across India. The applicable rate depends on the state and the property’s location, typically falling between 5% and 8% of the flat’s market value.
- Market vs agreement value: Authorities often calculate stamp duty based on the property’s market value, even if the agreement value mentioned in the sale deed is lower. This difference can sometimes lead to a higher stamp duty liability than expected.
- Additional charges: Alongside stamp duty, buyers must also pay a registration fee, usually around 1% of the market value, which adds to the overall transaction cost.
- Scope for negotiation: While the stamp duty rate itself is fixed by law and non-negotiable, buyers may negotiate the agreement value, which can impact the final stamp duty amount payable.
Calculation of stamp duty on resale flat
Stamp duty on a resale flat is calculated as a percentage of either the agreement value or the circle rate (government-declared minimum value for property transactions), whichever is higher. For instance, if you buy a resale flat in Mumbai for Rs 80 lakh, but the circle rate is Rs 85 lakh, the stamp duty will be calculated on Rs 85 lakh. Assuming a 6% stamp duty rate and a 1% registration fee, the total payable amount would be Rs 5.95 lakh. While stamp duty rates vary from state to state, typically ranging between 3% and 8%, registration charges are usually fixed around 1%. Buyers can use online calculators available on most state registration department websites to estimate the exact amount payable based on their location and property details.
How to pay stamp duty on a resale flat?
Paying stamp duty is a crucial step in completing the purchase of a resale flat, as it legally validates the property transaction. Here’s how you can do it:
1. Calculate the payable amount- The stamp duty is calculated on the higher of the property’s agreement value or ready reckoner rate (circle rate) as prescribed by the state government. You can check your state’s official property registration portal for the applicable rate.
2. Choose the payment method- You can pay stamp duty in any of the following ways:
- E-stamping: Available through authorised banks or state government portals (e.g., SHCIL in Maharashtra).
- Franked documents: Get the sale agreement franked at an authorised bank or stamp vendor.
- Physical stamp papers: Less common now, but still allowed in some states.
- Make the payment online or offline- It’s possible to pay stamp duty both online and offline.
- Online: Visit your state’s stamp duty payment portal, fill in the buyer, seller, and property details, and pay via net banking, debit/credit card, or UPI.
- Offline: Visit the sub-registrar’s office or an authorised bank to pay and get the receipt.
3. Keep the proof of payment: Always retain the e-stamp certificate, franking receipt, or original stamp paper as proof. This will be required at the time of property registration.
4. Register the property: Once the stamp duty is paid, you must register the sale deed at the local sub-registrar’s office within the stipulated time (usually within four months) to avoid penalties.
Exemptions and concessions on stamp duty for resale flats
While stamp duty is generally mandatory on resale property transactions, certain exemptions and concessions may help reduce the financial burden for eligible buyers. These benefits vary by state and are subject to periodic changes in government policies.
- Concession for women buyers: Many state governments offer reduced stamp duty rates if the property is registered in the name of a female buyer. For instance, Maharashtra provides a 1% lower rate for women compared to men.
- Joint ownership benefits: If the property is jointly registered with a woman (e.g., husband and wife), some states extend partial concessions in stamp duty rates.
- Senior citizen concessions: In a few states, senior citizens may receive a discount on stamp duty charges, especially for self-occupied residential properties.
- Family transfer exemptions: Transfers of property within close family—such as between parents and children, spouses, or siblings—may be eligible for reduced stamp duty or complete exemption, depending on state laws.
- Affordable housing schemes: Properties purchased under specific affordable housing programs may attract lower stamp duty rates to promote homeownership among low- and middle-income groups.
- Limited-period government incentives: During certain economic conditions or festive periods, state governments may announce temporary reductions in stamp duty to boost real estate activity. These are usually time-bound and location-specific.
How does stamp duty affect resale flat transactions?
Stamp duty and registration charges are more than just formalities—they play a significant role in the financial and procedural aspects of buying a resale home.
- Budget impact: These charges add noticeably to the total cost of a resale property. Since both are calculated as a percentage of the property’s value, they can strain a buyer’s budget and affect how much loan one might require.
- Increased transaction costs: In addition to stamp duty and registration, buyers also need to consider brokerage fees, legal consultation, and loan processing charges. Together, these expenses can increase the cost of acquiring a resale flat.
- Revenue for states: These levies are crucial sources of income for state governments. Funds generated through stamp duty and registration help finance infrastructure and welfare projects, making these fees a non-negotiable part of property transactions.
- Market influence: Changes in stamp duty rates can influence demand in the resale market. Higher charges might discourage buyers, especially in high-value localities, while a temporary reduction in rates often boosts property transactions.
- Legal necessity: Paying the correct stamp duty and ensuring registration of the sale deed are essential for the legal validity of the transaction. Non-compliance may lead to future legal complications or disputes over ownership.
Housing.com POV
Stamp duty and registration charges are an unavoidable part of purchasing a resale flat in India, just as they are with new properties. These government-imposed fees serve not only to legalise the transaction but also to support state revenue. While buyers of resale flats may save on GST, they must budget for stamp duty and registration costs, which can significantly influence the overall expenditure. Being well-informed about these charges, including how they’re calculated and their legal implications, ensures a smoother and legally compliant property transaction. Always check your state’s latest stamp duty rates before proceeding with a purchase.
FAQs
Has GST subsumed stamp duty on property purchases?
No, stamp duty and registration charges have to be paid separately on home purchases.
Who pays stamp duty on resale property?
The buyer pays the stamp duty during property registration.
Is stamp duty less for women buyers?
Most states charge lower stamp duty rates if the property is registered in a woman’s name.
Is stamp duty lower for resale flats?
No, states in India charge a uniform stamp duty, irrespective of whether the property is from the primary segment or secondary segment. So, for example, if buyers in Delhi pay 6% stamp duty on purchase of property, the rate is applicable for new flats as well as resale flats.
What is the primary market in real estate?
The secondary market in real estate comprises first-hand or new properties, upcoming projects and under-construction residential areas.
What is the secondary market in real estate?
The secondary market in real estate comprises second-hand or resale properties, existing homes and established residential areas.
Are resale flats cheaper than new flats?
No necessarily! An old flat in a premium location can cost a lot more than a new flat in an upcoming locality.