A real estate/property transaction contains several elements and components that ensure its success. From the buyer and seller arriving at the same financial conclusion to the lenders who disburse funds to regional authorities who register the property in the buyer’s name, the competition of all these steps in the transaction ensures a beneficial end for all the parties involved.
When a property is transferred from the seller to the buyer, possession and ownership interest in the property is also transferred. For legal evidentiary purposes, you need to get the property registered in your name with the local municipal authorities. A government tax called stamp duty is levied on property transactions and collected at the time of registration. This tax is levied under Section 3 of the Indian Stamp Act, 1899. This article seeks to explain the concept of stamp duty and modern developments that allow its collection via online means.
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How is e-stamp duty calculated?
- The quantum of stamp duty to be calculated depends on the property value of the residential property.
- The rates of levy vary from state to state and also on the type of property i.e. old or new. The revenues collected by stamp duty go to the State Government.
- In case of a property transaction, it is upon the buyer to pay the stamp duty on the property value. However, in case of property exchange both the buyer and seller have to equally pay the cost of stamp duty.
- To calculate stamp duty, all you need are the applicable state rate and the property value of the residential property. If you want to calculate it online, you can use the stamp duty calculator found on websites like Bajaj Finance and myloancare, etc.
How much is stamp duty on the property in India?
The levy and collection of stamp duty come under the purview of the State Governments in India.
- As such, there is no uniform rate of levy of the stamp duty in India, with the rates varying from state to state.
- In states like Assam, Meghalaya, Nagaland etc. the rate of tax is higher than 8% whereas in Jharkhand it is as low as 4%.
- In some states like Odisha and Haryana, the rates are different for men and women, with the rate of levy lower for women. In Odisha, the rate is 5% for men and 4% for women and in Haryana, the rates for men in urban areas and rural areas are 8% and 6% respectively, whereas, for women in urban and rural areas, the rates are 6% and 4% respectively.
How to pay stamp duty online?
The State Governments in India have taken measures to modernize the payment of stamp duty and registration fees on property transactions by introducing e-payment of stamp duty and registration fees.
- For instance, the Government Receipt Accounting System (GRAS), an online portal was introduced by the Finance Department, Government of Maharashtra for online receipt of revenues from taxes levied in Maharashtra.
- This portal allows you to access a link to make payments to the Department of Registration and Stamps, the authority that receives stamp duty and registration fees.
- The link leads to options where you can choose Citizen and choose to make a payment towards stamp duty and registration fees. After that, you have to enter the required details about the property, where you want to register, the payment details for the property, etc.
- An e-challan or acknowledgment is produced at the end of the process, one that can be printed and serves as proof of e-payment being made.
- There are similar e-payment facilities for stamp duty and registration fees in other states like Gujarat, Tamil Nadu, Delhi, etc.
Do I need to pay stamp duty if the property is transferred as a gift?
A property gifted to a person is transferred differently from a property sold to a buyer. This transfer of property is effected without consideration.
- A property transferred by a gift uses a gift deed, a document which needs to be registered by the provisions of the Registration Act, 1908
- Property transferred by gift is done so by the provisions of Section 122 of the Transfer of Property Act, 1882.
- Stamp duty for gift deeds is applicable but slightly lower than sale deed in case of family members.
- Also, as provided in the Income Tax Act, 1961, the property received by a person (individual) is taxable if the stamp duty value of such a property that is received without consideration (land or building or both) exceeds Rs 50,000
How can I save stamp duty charges?
Stamp duty and Registration charges are taxes levied on the property value of the residential property.
- A way to reduce stamp duty liability is by negotiating down the price of the property on sale. The lower the property value of the residential property, the lower is the quantum of stamp duty.
- Many states like Haryana, Punjab, Delhi, etc. give up to a 2% rebate on stamp duty if the property buyer is a woman. If you belong to these states, getting the property registered in a female family member’s name can save you some money against payment towards stamp duty.
- State Governments fix a minimum value for at which a property can be registered. This is called Government Guidance Rate. If you were to purchase a house at this price, this is the lowest possible price on which you have to pay stamp duty and thus registration charges can also be reduced.
Thus, even though stamp duty cannot be done away with, there are ways to reduce your liability when it comes to this property-based tax.
Stamp duty is only required to be paid once and if you fail to pay it, you have to pay the outstanding amount and a penalty of 2 percent on the outstanding amount per month. This penalty can go as high as 200% of the original liability.
Stamp duty and Registration fees are a minor but important component of the purchase value of a residential property. A home buyer is liable to pay stamp duty and registration fees to the respective State Government. You need to be aware of the rates prevailing in your home state. Knowledge of your local laws can help you save money and make the purchase of a house more affordable for you.
Also, updating yourself on the online ways to pay stamp duty can prove beneficial and convenient to you. Registration of change in property title is a mandatory legal procedure after the conclusion of a real estate transaction. By extension, payment of stamp duty and registration fees is also mandatory. But, if you are smart and well-informed, you can reduce your tax liability and save money when it comes to these expenses.