Stamp Duty – Payment, Charges etc.

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Last updated on September 28th, 2017 at 05:51 pm

Possession of a property is the physical transfer of the property which is not sufficient legally. You must have a legal ownership for this, which can be done by getting the property registered in your name. During the time of registration, you have to pay a stamp duty which is levied by the Government.

What is a Stamp Duty?

A Stamp Duty is a Government Tax that is similar to that of the Income Tax collected by the Government.  This tax is levied on all the legal property transactions. The stamp duty acts as an evidence in the fields of purchase and sells of the property. The stamp duty is payable under Section 3 of the Indian Stamp Act 1899. The Stamp Duty is levied to boost the revenue of the local Government besides lending a legality to a document.

Stamp Duty Payment and Charges

The Stamp Duty Charges must be paid in full with no delay. If delayed, then a penalty of 2% is charged on the monthly basis. The stamp duty charge is mostly paid by the buyer. As per the section 13 of the Indian Stamp Act 1899, an individual executing an instrument has to cancel the stamp (adhesive) by writing his initials or name across the stamp paper. If the stamp paper is not canceled in a proper way then it is considered as unstamped. The stamp duty charges vary from state to state.  The Central Government fixes the stamp duty charges for each specific instruments.

Stamp Duty On Property Registration

The legal evidence of ownership or the transfer of the property is mandatory. The buyer in most of the cases has to register his or her name in the Municipal Records. Here, at the time of registration, the buyer has to pay the stamp duty. The stamp duty also depends on the age of the property, like for example if the property is old or new.

Documents That Require Stamp Duty

Following Documents requires payment of stamp duty charges to be allowed as legal documents.

  • The transfer instruments.
  • Deed of Partition
  • Reconveyance of Mortgaged Property.
  • Mortgage Deed
  • Certificates of Sale
  • Gift Deed
  • Exchange Deed
  • Tenancy Agreement
  • Power of Attorneys
  • License Agreement
  • Lease Deeds

How To Pay A Stamp Duty

There are mainly three ways to pay a Stamp Duty

  • Through Physical Stamp Paper
  • Franking
  • E-stamping

Through Physical Stamp Paper

This is the most traditional method of paying the Stamp Duty Charges. This is a non-judicial stamp paper which is purchased by an authorized vendor. This paper is used for sale deeds, affidavits, agreements, wills etc in states across India. The stamp paper can be purchased from any licensed stamp vendor.

Franking

One of the major drawbacks of the Physical Stamp Paper is that the stamp papers are available only in the lower denomination. So, if in case an individual wants to purchase a stamp paper of a larger denomination then the person has to buy a number of papers which can be confusing and risky. Therefore, to avoid this sort of issues, there is an alternate method called Franking.

The franking of a document is quite similar to that of the Physical Stamp Paper. But here, you have to submit an application to an authorized bank or a franking agency. The document for which the stamp duty has to be paid is printed on a plain paper before the parties sign it, and a stamp is affixed on the paper indicating the value of the Stamp Duty to be paid. Every state has a minimum value for franking.

For example, the minimum franking charges in Bengaluru is 0.1% of the agreement value. So, if you are buying a house for Rs 50 Lakhs then you need to pay 01% or Rs 5000 as the Stamp Duty charge. The fee will, however, be adjusted against the stamp duty at the time you executed the sale deed. For example: if the stamp duty for the sale deed is 5.5% then you need to pay 5.4% because you have already paid 0.1% as the Stamp duty charge.

The benefit of the Stamp Duty is that it is quick especially when the payment is done through cash or using a demand draft.

The primary drawback of the Franking is that the franking machines are not available in all the bank branches. Along with that, there are no uniform rules for the authorized franking agencies. As a result, this can cause differences in the rules among the states as well as the bank branches.

Therefore, to avoid such obstacles and difficulties another improved method was introduced which is high on demand. This is called as e-stamping.

E-Stamping

Due to the certain errors and drawbacks of Franking and so as to avoid counterfeiting and make the payment of the Stamp Duty much easier and glitch-free, the Government has introduced a new payment system which is called as E-Stamping. The E-stamping is a computerized based application. It is a more secure way of paying a Non-Judicial Stamp Duty to the Government. This is mainly done online. The Stock Holding Corporation of India Ltd. (SHCIL) has been appointed as the official vendor for e-stamping and is also known as the Central Record Keeping Agency for all the e-stamps used in the country.

The benefits of the E-Stamping is that it can be generated in minutes and is hassle and tamper-free. All the data are stored in the SHCIL database. And, it authenticates online through a Unique Identification Number. The Payment modes that are accepted are: Cash, Debit/Credit Cards, Net Banking or Demand Draft

The major drawback of the e-stamp certificate is that if misplaced, then you cannot issue a duplicate copy of it and if you wish to cancel the request for an e-stamp or refund then, you need to visit the SHCIL office and not the Authorised Collection Centers that issued the certificate.

Stamp Duty Calculation

The Stamp Duty varies from one state to another. There are multiple numbers of parameters that are used by the Authority to calculate the stamp duty value. The value depends on various factors such as the locality, type of building etc. The stamp duty charge can also be revised as per the state budgets. The women can also get some concession on both stamp duty and the registration charges.

The factors that should be kept in mind while doing property registration:

  1. The calculation is done on the basis of the “Guidance Value” of the property. The Guidance value is the minimum amount or the value at which the property must be registered. This value is decided by the competent authority under the State Government.
  2. The values are indirectly proportional to the market value of the property and other aspects such as the Market Performance.
  3. The value of the property also depends the surrounding or locality, where it is located, whether it is an Urban or Rural area. Depending on that, the stamp duty is payable.
  4. Other levies such as the State and Central Taxes are also applicable on registration and stamp duty charges.

Now that you know the whole process of the Stamp duty registration, types and the documents required, now it would be easy for you to register and file for the house that you are planning to buy.  And this would be the best time to do so, as the home loan rates have dropped. Always compare across the lenders to get the best rates and benefits.

Stamp Duty Calculator

The Stamp Duty Calculator is a tool that is used to calculate how much Stamp Duty Charge is applicable on a given property in any state across India.

You need to provide various details regarding the property, its value and the state where it is addressed etc.

Like for an example: If a property worth Rs 10 Lakh is located in a corporation area then the Stamp Duty value will be Rs 56, 000 and if the same property worth Rs 10 Lakh is located in the village area then the stamp duty value will be Rs 56,500.

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