What is Stamp Duty Rates & Charges on Property?

The government levies a compulsory tax on the transfer of rights in a property, known as ‘stamp duty’. We examine how it is calculated and ways to save money on this tax amount

The government levies a tax when there is a transaction of property (i.e., when a property changes hands, from the seller to the buyer).

This tax is known as ‘stamp duty’. It is levied on residential and commercial property transactions, as well as freehold or leasehold properties. Stamp duty is levied by states and therefore, the rate varies from state to state.

 

How to calculate the stamp duty amount

Stamp duty ranges from three per cent to 10 per cent, depending on the slab decided by the particular state. The onus of paying the stamp duty, normally vests on the buyer of the property.

Stamp duty is calculated on the higher value, between the ready reckoner rate (circle rate) and the agreement value of property. For example, if the agreement value of a property is Rs 50 lakhs and the value according to the ready reckoner rate is Rs 40 lakhs, then, the stamp duty would be calculated on the higher value, i.e., Rs 50 lakhs.

 

The stamp duty percentage depends on several factors, such as:

  • Status of the property – whether it is old or new.
  • Location of the property – city area, rural area, metropolitan area, suburban, etc.
  • Age of the owner – discounts may be available for senior citizens, in some states.
  • Gender of the owner – some states also offer concessions for female real estate owners.
  • Usage of property – whether it is for commercial use or residential use.
  • Type of property – flat or an independent house, etc.

See also: Stamp duty and tax on gift deed of property


How is stamp duty paid?

There are three ways to pay the stamp duty – through non-judicial stamp paper, by franking method or by using the e-stamping method.

Under the non-judicial stamp paper method, the agreement details are mentioned in such paper and it is signed by the executants. Thereafter, within four months, it is required to be registered at the sub-registrar’s office.

Under the franking method, the agreement is printed on plain paper. This paper is submitted to an authorised bank, which processes the documents through a franking machine.

In some of the states, you can also pay the requisite stamp duty amount online, through RTGS/NEFT. Thereafter, the stamp duty certificate, with details such as the date, stamp duty type, etc., can be downloaded for the registration process.

 

What is stamp duty on property

 

What happens, if you pay inadequate stamp duty?

In some cases, for saving stamp duty, people show an undervalued property price, in the agreement. The government suffers revenue loss, due to such tax evasion.

If you pay inadequate stamp duty, then, you can be penalised heavily for the evasion. The punishment and penalty for stamp duty evasion, may vary from state to state. The penalty can range from eight per cent to 20 per cent of the actual stamp duty, with minimum penalty limits and imprisonment for certain periods, as per the state’s rules.

 

How to save on stamp duty charges?

Some states provide significant discounts on the stamp duty, for female realty buyers. So, if you are looking to save on stamp duty, you can purchase the property in the name of any female family member. If you have shortlisted several locations for your property purchase, you can compare the stamp duty charges in the various locations, to decide which location offers the lowest stamp duty value.

The real estate fraternity has also been demanding that affordable housing be exempt from stamp duty charges. If this happens, buyers in this segment can save a substantial amount. Sometimes, developers agree to bear the cost of stamp duty and registration charges. However, you need to be careful that you do not get charged for it in indirect ways.

 

Stamp duty charges in various cities

City Stamp duty rate
Stamp duty in Mumbai 3% to 5%
Stamp duty in Pune 3% to 5%
Stamp duty in Hyderabad 4.00%
Stamp duty in Chennai 7%
Stamp duty in Bengaluru 5%
Stamp duty in Delhi 4% to 6%
Stamp duty in Ahmedabad 4.90%
Stamp duty in Kolkata 5% to 7%

 

 

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