A landlord and tenant must execute a rent agreement specifying all terms and conditions of the tenancy. To provide legal validity to rent agreements, it must also be registered following the due procedure and by paying the necessary charges. Typically, tenants drafting rent agreements must get the document registered if the tenancy period exceeds 11 months. This is one of the reasons why rent agreements are drafted for 11 months. According to Section 17 of the Registration Act, 1908, annual registration of leases of immovable property or for any term exceeding or reserving a yearly rent, is mandatory. To register a rent agreement, you will also need to pay a stamp duty on it. In this article, we discuss key details related to stamp duty on rental agreements.
What is stamp duty?
Stamp duty is a tax levied by the government on legal documents related to the sale, purchase or transfer of property. Registration of property documents in government records is mandatory to ensure the transaction gets legal recognition while it forms a significant portion of the government. Stamp duty rates vary based on the location, property type, value, etc.
What is a rent agreement?
A rent agreement refers to a contract signed between two parties – the landlord and the tenant, mentioning the terms and conditions of the tenancy. It is a legal document that specifies details such as the terms of the agreement, monthly rent, security deposit, maintenance and repairs, termination and renewal, and several other important clauses that protect the interests of the landlord and tenant. Both parties are required to adhere to the terms and conditions, thus preventing disputes or misunderstandings.
Do you have to pay stamp duty on rental agreements?
Stamp duty is the government’s charge, levied on different property transactions. You need to pay a stamp duty when you buy a property and also when you go in for a rental agreement. Stamp duty is payable under Section 3 of the Indian Stamp Act, 1899.
Also read all about income tax provisions for TDS on rent
Stamp duty on rental agreements in Indian states
| Area | Agreement time period | Amount |
| Delhi | Up to 5 years | 2% of the total average annual rent of a year |
| Noida | Up to 11 months | 2% |
| Karnataka | Up to 11 months | 1% of the total rent plus deposit paid annually or Rs 500, whichever is lower |
| Tamil Nadu | Up to 11 months | 1% of rent + deposit amount |
| Uttar Pradesh | Less than a year | 4% of annual rent + deposit |
| Maharashtra | Up to 60 months | 0.25% of the total rent |
| Gurgaon | Up to 5 years | 1.5% of the average annual rent |
| Gurgaon | 5-10 years | 3% of the average annual rent |
See also: Stamp duty in key tier-2 cities in India
Stamp duty on rent agreement in Delhi
In Delhi, the stamp duty value on a registered rental agreement is based on the lease tenure. The stamp paper value is 2% of the total average annual rent and Rs 100 as the security deposit for a period ranging one to four years. The stamp duty rate is 5% of the total average annual rent if the lease period is between five to 10 years. In case where the lease tenure is 10 to 20 years, a stamp duty of 5% of double the total average annual rent is applicable. In addition, a registration fee of Rs 1,100 is applicable.
Stamp duty on rent agreement in Maharashtra
The stamp duty on rent agreement in Maharashtra is charged according to the Bombay Stamp Act, 1958. The stamp duty rate on rental agreements in Maharashtra is fixed at 0.25% of the total rent for up to 60 months.
Stamp duty on rent agreement in UP
Stamp duty on rent agreements in Uttar Pradesh for period up to 11 months is 4% of the annual rent. For rent agreement tenure exceeding 11 months, the stamp duty is 8% of the annual rent in UP. The registration fee is 2% of the rent and deposit of around 0.5% of the security deposit is also applicable.
Stamp duty on rent agreement in Karnataka
In Karnataka, the stamp duty is 0.5% of the annual rent and deposit or Rs 500 (whichever is lower) when the lease period is less than one year. In case the rental agreement is registered, the stamp duty is 1% of the annual rent and deposit or Rs 500 (whichever is lower) if the lease tenure is from one to 10 years. The stamp duty is 2% of the annual rent and deposit or Rs 500 (whichever is lower) if the lease tenure is 10 to 20 years. The registration charges start from Rs 200 and range from 0.5% to 1% of the annual rent and deposit.
What is the stamp paper value for 11-month rental agreement in India?
For documents such as rent agreements to be considered legally valid, they need to be executed on stamp paper. A stamp paper is simply an A4 size paper on which the revenue value is printed. The stamp paper value ranging from Rs 50 to Rs 1000 are used, based on the buyer’s preference. Typically, stamp paper value for creating an 11-month rental agreement is Rs 100.
What is a stamp paper?
Stamp paper is an A4 size paper on which revenue value is printed. In India, stamp papers are fixed in value. The minimum stamp paper for a rent agreement is Rs 50, and it can go up to Rs 1000.
Can rent agreement be made without a stamp paper?
Preparing a rent agreement without a stamp paper will not give it legal validity and may not hold up in court in case of any dispute.
Is Rs 50 stamp paper valid for rent agreement?
Getting a rent agreement drafted on a Rs 50 stamp paper may be acceptable in some cities/states such as Delhi. However, in some states, the minimum stamp paper required for rental agreements is for a value of Rs 100. Thus, it is advisable to consult a legal expert to ensure that you meet the specified stamp duty regulations in your area. Non-compliance with legal requirements can lead to penalties.
It is crucial for both parties, the landlord and the tenant, to execute the rent agreement on a non-judicial stamp paper of the appropriate value in accordance with the provisions of the Indian Stamp Act, 1899. This is necessary to ensure the validity and enforceability of the rent agreement.
Is GST applicable on stamp duty on rental agreements?
The Goods and Services Tax (GST) is not applicable to stamp duty and registration charges. Stamp duty is a specific tax that state governments levy on the registration of property documents that are not classified under goods or services according to the GST Act.
Is GST applicable on stamp paper?
Under the existing GST Law, nonjudicial stamp papers are exempt from GST. So, no GST charges are applicable on stamp paper.
How to pay stamp duty on rental agreements?
e-stamping
The stamp duty on the rental agreement must be paid by buying a stamp paper. Some states offer e-stamping facility. The Stock Holding Corporation of India Limited (SHCIL) is the central record keeping agency (CRA) appointed by the central government for granting e-stamp certificates in the country.
- Visit the SHCIL website
- Click on e-stamp services
- Choose the state from the dropdown
- Complete the application form and submit it at the authorised collection center along with the payment of stamp certificate.
Offline method
Some states follow the traditional method of impressed non-judicial stamp papers purchased from stamp vendors.
Online method
In some states such as Maharashtra, the stamp duty can be paid online through the official government website.
Franking
Another widely used method to pay stamp duty is the franking method. This involves submitting an application at a bank or any authorised agency along with the document on which stamp duty must be paid. The agency puts a stamp on the document.
How is the stamp paper value for a rent agreement determined?
- Location: Location is the prime factor when it comes to estimating the stamp paper value.
- Rent agreement tenure: The duration of the agreement also plays a role. Stamp duty on short-term and long-term leases are different from state to state.
- Annual rent: Annual rent is also a factor, especially in commercial rent agreements.
- Type of property: The stamp paper value for rent agreements may vary based on whether the property is residential or commercial.
Now use Housing.com’s tool to generate rent receipt online
Is stamp duty applicable for month-on-month rental stay?
A month-on-month stay can be written on paper, without any registration. Stamp duty on rental agreements is more important for short-term to long-term stays.
What is the stamp duty on a backdated rental agreement?
A rental agreement can be given retrospective effect, within the terms of the agreement. However, stamp duty charges cannot be backdated.
Who should buy a stamp paper for a rental agreement?
Either the landlord or the tenant can buy the stamp paper and it will continue to be the purchaser’s. If you want to own an original agreement, you must buy the stamp paper yourself. You can otherwise get a photocopy or scanned version from the other party.
In India, the tenant normally bears the cost of preparing a rent agreement and stamp duty. They are responsible for registering the rent agreement as per local laws. However, the rent agreement cost can be borne by the landlord or shared between both parties.
Where to get stamp paper for rental agreement?
One can obtain a stamp paper for a rent agreement from the nearest civil court. There is an online method to purchase stamp paper by visiting the authorised e-stamping portals.
What is e-stamping and is it valid?
Yes, e-stamping is available in certain states. In the case of e-stamping, you will not need to physically go and buy a stamp paper for the rental agreement. You can simply log on to the Stock Holding Corporation of India Ltd (SHCIL) website and figure out whether your state offers the facility of e-stamping.
Why is it necessary to register a rent agreement instead of getting it notarized?
A notarised rent agreement refers to legal verification of the document by a notary public. Many people consider notarised agreement as the cost involved is lower compared to the stamp duty that needs to be paid during registration. However, one should consider registering the rent agreement instead of a notarised agreement. The main reason is that a registered rent agreement is admissible in a court of law.
How do I get an online rental agreement?
Housing.com has launched an online rental agreement facility. You will no longer need to have your tenant or landlord’s physical presence, to complete the rental agreement process. All you need to do, is fill out the details on Housing Edge, sign the agreement digitally and get your rental agreement e-stamped in seconds.
Also read: Rental agreements go completely digital with Housing.com
Why is a rent agreement for 11 months?
In India, rent agreements are typically signed for 11 months instead of one year (12 months). As per the Registration Act of 1908, registration of a lease agreement is a must if the lease period exceeds 12 months. For example, the stamp paper cost in Delhi is 2% of the total average annual rent of a year for a lease of up to five years. A fee of Rs 100 is applicable if a security deposit is part of the agreement. Moreover, registration charges are also applicable. The primary reason for drafting rental agreements for 11 months is to avoid the costs involved, such as stamp duty and the complexities of registration of rent agreements.
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When renting a property, create a rent agreement outline and get it printed on Stamp Paper of suggested value. You can approach a legal professional who will prepare a rough draft mentioning all the terms and conditions. The landlord and the tenant must review the draft. If it is acceptable to both parties, the document will be printed on stamp paper. The document has to be signed by both parties, along with two witnesses. The paper can then be registered at the sub-registrar office.
FAQs
Why is a rental agreement executed on stamp paper so important?
Most institutions such as banks, gas distribution, HRA claims, vehicle purchase, school applications, telephone connections, etc., will consider your rental address proof, only if it is executed on stamp paper.
Do stamp papers have an expiry date?
Although you can use stamp papers even after six months of purchase, unused ones ideally should be given back to the collector within six months and you could get a refund too. Using old stamp papers is not a good idea.
Is rent agreement registration compulsory?
Rent agreements of one year or more, have to be registered. For agreements of less than a year, only the stamp duty charge is applicable, while registration is not mandatory.
What happens if you do not pay stamp duty on rental agreement?
A rent agreement that is not registered on a stamp paper is not admissible as evidence in a court of law. Generally, people use stamp paper of minimum values of Rs 100, Rs 50 or Rs 20 to save the cost of stamp duty levied by the government. However, this will not work in case of litigation. The court may impose a fine of up to 10 times the original stamp duty.
Is stamp duty applicable for rental stays on a month to month basis?
If the rental stay is less than 11 months, registration of the agreement and stamp duty is not applicable.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
