STAMP DUTY is a tax levied by the government on property transactions. When you buy a real estate property, say a house, mere physical possession of the property is not sufficient. You also need to have evidence of legal ownership of the property for which you need to pay stamp duty and registration charges.

As per the constitutional arrangement, the stamp duty is levied and collected by the state government and consequently, it varies from state to state. Further, the stamp duty is dependent on the value of the property which in turn depends on other factors like type of the property (residential/commercial), the age of the property, property location etc. Since it adds to the overall property cost, therefore, it becomes important to understand consider it as a factor in your financial planning architecture while buying a house.

What is stamp duty?

Stamp duty is nothing but a direct tax levied by the government and payable under section 3 of the Indian Stamp Act, 1899 on all documented financial transactions including bills of exchange, letters of credit, promissory notes, letters of credit as well as property transactions. A document on which stamp duty is paid is legally permissible and can be presented as evidence in the court of law.

When is stamp duty payable?

Stamp duty is payable before the execution of transactions. one can also pay the stamp duty on the next working day of the date of execution of the transaction. Any further delay in the payment of stamp duty will attract a penalty at 2% per month upto a maximum of 200% of the remaining amount. Therefore, it is advisable that the stamp duty is paid in full and on time.

Who is liable to pay stamp duty?

In the absence of an agreement to the contrary, it is the purchaser/ transferee of the property has to pay the stamp duty. However, in the case of exchange of properties, both parties are liable to pay stamp duty equally.

How should one sign an instrument fixed with the adhesive stamp?  

As per Section 13 of the Indian Stamp Act, 1899, an individual executing an instrument need to cancel the stamp (adhesive ) by writing his name ( Signature ) across it. If the stamp is not cancelled as mentioned, the document will be considered as unstamped.

Is stamp duty payable on all the documents relating to the transfer of immovable property?

Except in the case of transfer by will, stamp duty is payable on all transfer instruments before registration including the agreement to sell, conveyance deed, gift deed, mortgage deed, exchange deed, power of attorney, tenancy agreements, lease deed etc.

How the stamp duty is calculated?

Since the stamp duty is levied by the state governments, it varies from state to state. Stamp duty basically depends on the value of the property. However, property valuation is done using the guidance value method. Guidance value (circle rate) is the minimum value of the property at which the property should be registered. The circle rates are decided by the competent authority under the state government. Property valuation is dependent on various factors including the location of the property, property type, year of construction etc.

Documents Required For Payment of Stamp Duty and Registration Charges

If you a homebuyer, you have to produce the following document at the time of registration of property and while paying stamp duty:

• Sale agreement
• Sale deed
• Khata Certificate
• In case of a housing project, one shall provide the photocopy of society share certificate, society registration certificate and NOC from the apartment association
• In case of an under-construction property, you should produce a sanctioned building plan, builder-buyer agreement and possession letter from builder.
• In case of land purchase, you should provide title documents of the landowner, records of right and tenancy corps or 7/12 extract and conversion order.
• In the case of joint development property, you should have registered a development agreement and joint development agreement between landowner and builder.
• In case of resale property, copies of all registered agreements
• Receipt of tax paid for the last three months
• Latest bank statements
• Encumbrance certificate
• Power of attorney/s if applicable

Stamp Duty Rates

Since the stamp duty on property transactions is levied by the state governments, it varies from state to state. It usually varies between 5-8% of the property value. Additionally, you need to pay about 1% registration charge over and above the stamp duty but that again may vary state wise.

Stamp Duty Charges in the Different States