Purchasing property entails numerous hidden and upfront charges. Stamp duty and registration fees are two significant expenses that an Indian property buyer must consider when purchasing a property. Moreover, simple physical possession is not enough when you purchase a real estate property, such as a house. You must also provide proof of legal ownership of the property, for which you must pay stamp duty and registration fees.
The government levies a tax on the transfer of property from seller to buyer. Stamp duty is the name for this levy. Residential and commercial real estate transactions, as well as freehold and leasehold properties, have to pay these taxes. The term stamp duty refers to the stamp mark on a document that indicates the authorities have approved it and therefore holds legal status.
Tax varies from state to state
The state government charges and collects the stamp tax under the constitutional framework. Hence it differs from state to state. Furthermore, the value of the property determines the stamp duty. And the property value depends on other criteria such as the type of property (residential/commercial), the age of the property, the location of the property, and so on. As it increases the overall property cost, it is critical to understand and factor it into your financial planning when purchasing a home.
It is critical to note that the tax varies from state to state. The overall cost of stamp duty and registration charges may vary depending on various factors, such as property valuation, location, and appropriate tax rates in the individual state.
Stamp duty FAQs
Stamp duty is a state government tax levied on property transactions. It is the percentage of the property’s overall worth, and the rate varies by state. The stamp duty in most states ranges from 5% to 7% of the property value. The direct tax is payable under Section 3 of the Indian Stamp Act of 1899 on all documented financial transactions such as bills of exchange, letters of credit, promissory notes, letters of credit, and property transactions. A document with paid stamp duty is legally admissible and can be produced as evidence in court.
Stamp duty gives the document legality. It is proof of any property purchase or transaction between the parties. Stamp papers must be purchased in the seller’s or buyer’s name and are valid for six months if the stamp duty is paid on time.
Registration fees are fees paid to the government for registering the property in the buyer’s name. The cost is usually a tiny fraction of the overall property value, usually around 1%. Property registration falls under Section 17 of the Registration Act of 1908. Registration is required whenever an immovable property is sold or purchased. If case a property is not registered in the buyer’s name in government records, they are not the legitimate owner and cannot contest it in court.
The property can be registered in the new owner’s name once the stamp duty and registration fees are paid. The stamp duty and registration fees differ from state to state.
The stamp duty for land remains the same as other immovable property across a state. It varies from state to state as the state government sets it. Stamp duty rates may also differ based on the type of property, location, and intended use of the land-commercial or residential.
There is no exemption for first-time buyers in India.
Second-home buyers do not get any rebate in stamp duty.
The stamp duty varies by state because the state governments levy it. Stamp duty computation is based on the value of the property. On the other hand, property valuation is done using the guidance value method. The guidance value (circle rate) is the property’s minimum value at which it should be registered. The state government’s competent body sets the circle rates. Property valuation is affected by a number of elements, including the property’s location, type, and year of construction.
Stamp Duty Terms
Stamp Duty threshold
The stamp tax on property sales differs by state because the state governments levy it. It typically ranges from 5-8% of the property’s value. In addition to the stamp duty, you must pay an additional 1% registration fee, which can vary by state.
Stamp duty as per owner (male, female, and joint)
There is no exemption provided to male home buyers in India. The state government of the place where the property belongs fixes the rate, and thus it can differ from one state to the other.
Female buyers may be eligible for a lower stamp duty rate or exemption in some states. However, this varies by state and is subject to change. States charge lesser stamp duty when a residence has a woman as the owner in order to encourage women to buy property. In Delhi, for example, women buyers pay only 4% in stamp duty on property purchases, while men pay 6%. Lower rates are also available if the residence has joint registration and the women are the principal co-owners.
However, not all states offer this concession to women. For e.g. in Kerala, Bihar and Jharkhand, men and women both pay similar stamp duty charges. In UP also, women enjoy a 1% rebate on stamp duty if the worth of the property does not exceed Rs 10 lakhs.
In case the property has joint owners, the stamp duty rate calculation is based on each owner’s share in the property. For example, if a male and female owner jointly owns a property in Delhi, the stamp duty rate is 5% of the property value.
Documents for Stamp duty
The Indian government levies stamp duty on property on the sale, transfer, and lease of property. The documents required for stamp duty on property in India may vary depending on the type of transaction. When registering a property, the buyer must present certain documents depending on the type of property they are purchasing. Here are the common documents essential for paying the duty charges: When purchasing a property, make sure to have these important documents ready :
- These include the sale agreement, sale deed, and Khata certificate.
- If you are buying a property still under construction, you will also need the sanctioned building plan, builder-buyer agreement, and possession letter from the builder.
- For land purchases, you will need the title documents of the land owner, Records of Rights and Tenancy Corps or 7/12 extract, and a conversion order.
- Additionally, you will need tax-paid receipts for the last three months and an encumbrance certificate.
- If you purchase a joint development property, you will need the registered development agreement, power of attorney/s (if applicable), and joint development agreement between the land owner and builder.
- For a resale property, you will need copies of all registered agreements and the latest bank statements in case of an outstanding loan amount.
- In the case of a housing project, you will need a photocopy of the society share certificate and society registration certificate and a NOC from the apartment association.
In Conclusion
It is important to note that stamp duty rates in India can differ depending on the state. Here is the stamp duty rates table for various states in India. The website for stamp duty calculation is https://stampdutyindia.com/. One can compute stamp duty with basic information such as state name, city, type of property, and ownership details. For more information on stamp duty and registration charges, visit the government website https://dor.gov.in/stamp-duty. Each state has its own official website for stamp duty, and registration charges information and rates.
