Buying a real estate property is a tedious task, and involves a lot of procedures, such as signing the agreement, conducting a title search to ensure there are no encumbrances over the property, applying for loans, etc. After all this is done, the final step is considered to be the possession of the property. Possession is the physical transfer of the property with the new owner of the property, but this is not sufficient to prove ownership over the property.

After the possession of the property has been transferred to the buyer, it is his responsibility to get the property registered. There is also a need to have legal ownership over the property. At the time of registration, the buyer will also have to pay a stamp duty which is a government tax levied on property transactions.

Stamp duty is a tax which is to be collected by the government. It is payable before the execution of the document or on the day of execution of the document. Execution refers to putting down the signature of the parties to the document to justify the transaction.  Failure to pay the stamp duty is an offense and is punishable under the law. They can be purchased in the name of the buyer or the seller.

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What are my rights over the property I own?

The following are the rights that a person has over his/her property.

  • Right of possession –

This means that the landlord has to ensure that the tenant is able to move into the premises at the beginning of the lease. The tenant need not pay the rent amount until possession of the property is allowed by the landlord.

  • Right to evict tenants –

Since the actual ownership of the property is with the landlord and the tenants have taken the property on rent/lease based on certain conditions. If the conditions are not followed, the landlord has the right to evict the tenants from his property.

  • Right to a temporary recovery of possession –

if the landlord finds it necessary to take temporary possession of the property for the purposes of construction, alterations, or repairs, he may take temporary possession of the property by asking the tenants to vacate.

  • Right to increase rent –

Property owners have the right to increase the rent over their property according to market rates. In some states, the increase in rent amount has to be in accordance with the state laws.

  • Right to be advised about necessary repairs –

It is the responsibility of the property owner to maintain the property in a rentable form. The tenant may inform the property owner about major repairs that are required to be carried out. The landlord has to respect the right of privacy of the tenant and cannot enter at the premises at any time or for any reason.

  • Right of exclusion –

the property owner has the right to prevent people from entering the premises of his property.

Is property tax decided by the central government?

Assetscan-The failure to pay the Stamp Duty and its aftermathProperty tax is the annual amount paid by a property owner to the local government/municipal corporation of the area. Tax can be paid annually or semi-annually. Property Tax is levied by the municipal authorities on real estate. It is based on the value of the property, area, construction, property size, etc. The rate of property tax and manner of valuation varies from one municipal authority to the other. The money which is collected as tax is used for public services like repairing roads, construction of schools, buildings, sanitation facilities, etc.

What if I fail to pay the stamp duty?

Stamp duty is a one-time charge paid under Section 3 of the Indian Stamp Duty Act, 1899. In case of a dispute, the document showing you have paid the stamp duty acts as a legal proof of your ownership over the property. It should be noted that property registration papers are not counted as legal proof; they only prove that you paid a fee. The following are the consequences for the failure to pay stamp duty – 

  • Any delay in payment of stamp duty will pull in 2% per month to a maximum of 200% of the deficit amount of stamp duty. 
  • Stamp papers are to be purchased in the name of either of the parties, i.e., seller or buyer involved in the agreement, failing which will disable the stamp paper. It is said to be valid for six months from the date of purchase, only if the duty is paid on time

Are there any restrictions on the ownership of a property for an NRI?

The Reserve Bank of India (RBI), has issued a notification that grants general permission to NRIs for the purchase of certain immovable properties without obtaining specific permission from the RBI. The allowance of purchase of property is restricted to residential and commercial properties.

An NRI or Person of Indian Origin (PIO) can own both residential as well as commercial properties in India and there is no restriction on the number of properties that can be bought. However, an NRI cannot purchase any agricultural land, farmhouse, and plantation property. Ownership of such property can only be obtained if they’ve been gifted or inherited by such a person.

Conclusion

There are many additional costs that have to be paid by buyers while purchasing a property. The amount that is paid by the buyer to register the documents in the government records so that it is present as proof of ownership, is the stamp duty amount. It is a tax that is collected by the government. The payment of stamp duty is mandatory and is also important for the buyer to assert legal ownership over the property. It is important to understand that mere possession of the property does not amount to the ownership of the property.

It can be seen that the evasion of stamp duty is an illegal act, and doing so can cause the entire transaction to be declared as invalid. Failure to register the property will lead to a penalty which would have to be paid. The stamp duty can be used as evidence to prove ownership of property in the case of a dispute. Since it is a state subject, each state has a different rate of stamp duty which is charged from the buyer. In most cases, it is usually the buyer who pays the stamp duty associated with the property.