The purchase of a property is inclusive of various charges and the amount quoted by the seller is not the end of your expenses in the purchase of the property. The sales transaction of a property includes various taxations and additional charges attached to it such as the registration charges, stamp duty charges, cess, and surcharges.
All these additional expenses or charges on the property can come up to 7-10% of the total value of the property. In most of the states in India, an amount equivalent to 5-7% of the total market value is charged as stamp duty while 1% of the total market value is levied as the registration charges.
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What is Stamp Duty tax?
The concept of stamp duty was introduced in the late 19th century which made the homebuyers liable to pay a sum of money as tax while they purchase a particular property. In other words, it can be stated as the tax amount that is charged by the state government on the various documents that are required for registration. You are mandatorily required to make the payment of the stamp duty tax while you purchase a property under Section 3 of the Indian Stamp Act, 1899. All the real estate properties such as the freehold or leasehold unit, land (agricultural and non-agricultural), independent houses or villa, residential flats, or commercial units are charged with the stamp duty charges by the state government.
The state governments collect the stamp duty tax to validate the registration process of your agreement. A sales deed with stamp duty tax paid tag forms the conclusive proof of legal ownership of the buyer in the property in the court of law. On the failure to make the payment of the stamp duty tax, the person cannot demand legal rights over the property. Thus the stamp duty taxmust be paid in full to acquire a complete right over the property.
What are the factors affecting stamp duty charges?
The various factors that help in the determination of the stamp duty tax include the following:
Age of the property
The age of the property is one of the most important determinants that help in calculating the amount payable as stamp duty charges. As the stamp duty tax is calculated as a percentage against the total market value of the property, the new buildings are charged higher amounts as stamp duty tax while the old building attracts lower amounts. The main reason for the disparity in the amount is due to the fact the old property will be affected by depreciation.
Age and Gender of the Owner:
One of the other factors that help to determine the stamp duty charges includes the age of the owner. Most of the states in India have subsidized the stamp duty charges for senior citizens. Thus the determination of the age of the owner plays an important role. The gender of the owner also plays an important role. Just like the senior citizens, the women in the country are also subjected to certain tax reductions on the purchase of a property than the men in whose name the property is registered.
Men are required to make 2% more than women and an example of this could be that the normal stamp duty charges in Delhi are 6% while a woman is granted discounts and she is only liable to make a payment of 4% as stamp duty tax for the registration of the property.
Another important factor that helps in the determination of the stamp duty tax includes the purpose for which the property is purchased. If the property is purchased for commercial uses, then the amount charged on them is higher than the amount that is payable on the residential property. This because the commercial buildings require additional amenities such as floor space, and security features.
Location of the property:
If the property of your choice is situated in the municipal location or the upscale urban area, then, it may attract a high amount as the stamp duty charges. On the other hand, if your property is located at the Panchayat level or on the outskirts, then you have to pay only a less amount as the stamp duty tax. It is also to be noted that the government charges or all the extra amenities on your property as well. The government has provided a list of about 20 amenities for which you may be taxed and this includes lifts, swimming pool, library, club, gym, community hall, and sports area.
How is stamp duty charges calculated?
As already stated above there are various factors that help in determining the stamp duty charges that are payable during the registration of the property. However, a baseline calculation of the stamp duty tax can be carried out by determining the total market value of the property as it is an amount that is used to calculate the stamp duty tax. In cases wherein the market value of the property is high, the party will be required to furnish a higher amount as the stamp duty tax and vice versa.
If there arises a situation in which a property has a different market value and a different agreement value, then whichever is higher is considered for the calculation of the stamp duty tax. Then the percentage which is fixed by the government is taken and charged as tax. Generally, the officials responsible for determining the stamp duty charges, uses the Stamp Duty Ready Reckoner which is published by the state government every year on the 1st of January, to fix the value of the property.
What are the documents required for the payment of the stamp duty tax?
The various documents that are needed for the payment of stamp duty tax include the following documents:
- The sales deed and sales agreement.
- Latest tax receipts (last three months)
- Title documents of the property and in cases of resale, the copy of the previously registered sales deed is also required.
- Khata extract and Khata certificate issued by the municipality
- Conversion order in this case, the property has been converted from agricultural land to residential property.
- Documents to show that no dues are pending on the property such as the bank statement of the owner.
- NOC from the Apartment Association and the Builder. NOC shall also be obtained from the bank of the seller if there are any pending dues on the property.
- The sanctioned plan, the occupancy certificate, or the possession certificate along with the utility bills such as electricity and water bills.
- Encumbrance certificate
- Power of attorney (if applicable).
Stamp Duty Tax in different states
|State||Stamp Duty (Rate)|
|Assam||8.25% of consideration|
|Goa, Daman and Diu||8% of consideration|
|Haryana||12.5% of consideration|
|Madhya Pradesh||7.5% of market value|
|Chhattisgarh||7.5% of market value|
|Nagaland||7.5% of consideration|
|Punjab||6% of consideration|
|Tamil Nadu||8% of market value|
|Rajasthan||11% of market value of property|
|Uttar Pradesh||8% of market value or consideration|
|Tripura||5% of consideration|
|Delhi||3% stamp duty + 5% surcharge as per Delhi Municipal Corporation Act,1957|
8.5% (transfer of immovable property within the Municipal Corporation)
|Meghalaya||4.6 % (up to Rs.50,000) of consideration. 6 % (Rs.50,000 to Rs.90,000) of consideration. 8% (Rs.90,000 to Rs.1,50,000) of consideration. 9.9% (above Rs.1,50,000) of consideration.|
|Bihar||7% + 2% duty on transfer (within municipal limits)|
|Jharkhand||7% + 2% duty on transfer|
|Karnataka||10% of market value (within Bangalore Metropolitan Regional Development Authority); 9% (Corporation or Town Panchayat) of market value|
|Maharashtra||10% of market value ( Municipal Corporation of Pune, Navi Mumbai)|
Summing up it is to be stated that the payment of the stamp duty tax is an important aspect for attaining legal rights over the property. Some people, to reduce the burden of the stamp duty tax, opt for malpractices such as undervaluing the property. However, this is an offense under the law and such people engaged in the malpractice would be levied with huge penalties and may even be imprisoned.
Thus it is always advised that the buyers and seller may the payment of the right amount of stamp duty tax and the payment should be made in full to avoid any future legal battles. Legal disputes on the sale of the property are quite common in India and it is always advisable to have a registered sale deed with the tag showing the payment of the stamp duty tax as it is conclusive proof of ownership and has a great evidentiary value in the court of law.