Property Stamp Duty

What is Stamp Duty? Why should stamp duty be paid?

Stamp Duty is basically a transactional tax and it plays a very vital role in property transaction. No transaction is considered to be completed if proper stamp duty is not paid to respective government office. Stamp duty is quite similar to that of income tax and sales tax collected by the Government. In case of property, it is charged on their market value or the agreement value of the immovable property, whichever is higher. The tax needs to be paid on time and in full. Any delay in the payment of Stamp Duty attracts penalty. A stamp duty paid agreement or document is considered legal and gets evidentiary value in the courts. Agreements/documents not stamped are considered illegal and not admitted as evidence in the court. Without the stamp duty, your solicitor will fail to register the new property in your name officially, even if the property is transferred within the family.

On what aspects is the stamp duty payable?

Stamp Duty is the charge, which the local and state government charge from the people at the time to change of ownership of any immovable property, any right or liability that is transferred created, limited, extinguished, extended, or recorded on payable. Having said that, it is imperative to mention that stamp duty does not take under its purview any bill of exchange, cheque or promissory note, letter of credit, bill of lading, transfer of shares, policy of insurance, debentures proxy and receipt.

How much is the stamp duty rate?

The rates of stamp duty on agreements relating to immovable property differ from state to state. The rates are specified in Article 25 of Schedule 1 of Bombay Stamp Act, 1958. Normal rates of 8%, 6%, 5%, 3% etc. are applicable depending on where the property is situated.

As per the Maharashtra Stamp Act 1958, a 5% stamp duty is payable by the purchaser on purchase of any property within the judiciary limits of Municipal Corporation of Mumbai. A 6% stamp duty is payable if the purchased property is within the limit of TMC.

The list below provides precise details regarding the stamp duty imposed as per State:-

How do I calculate the stamp duty payable on my property?

Calculating and finding out the payable stamp duty on your property is no longer a tedious task. One can find out the market value of one’s property and the corresponding stamp duty amount on the property from the Ready Reckoner. One you know your division/village name and C.S. / C.T.S number of your property, you can locate the valuation zone and sub-zone form the Ready Reckoner. The table will inform you about the rate per square meter of the property in the particular zone and accordingly you can multiply the same value with the built-up area of your property in square meters. Once you get this value, you can reduce or increase by lift and depreciate as per the valuation norms given in the Ready Reckoner and you will get the market value.

The same procedure is undertaken to adjudge the nominal fee. The process of taking out the valuation of a property and arriving at tits market value is known as adjudication. One needs to apply for the adjudication process, along with the copy of the agreement that contains the details of the property to the Collector of Stamps. The adjudication fee is INR 100. If the document is signed, the adjudication process must be affected within one month otherwise a penalty of 2% is levied per month from the date of signature. An unsigned adjudicated property agreement is valid up to six months from the date of adjudication order up to 31st December of that year whichever is earlier.

Who is liable to pay the stamp duty?

The purchaser, in the absence of any agreement to the contrary, needs to pay the stamp duty. In case of exchange of properties, both the parties need to bear the expenses equally.

Following are some of the sites that help an individual calculate the stamp duty on their property.

Who is liable to pay the stamp duty? What is the penalty is the stamp duty payment is delayed?

The purchaser, in the absence of any agreement to the contrary, needs to pay the stamp duty. In case of exchange of properties, both the parties need to bear the expenses equally.

When the specific authority does not duly stamp any document, it attracts penalty as per the regulation of law. The law is applicable on each property transaction whether it is sell/but/exchange or rent. Stamp Duty is to be paid to the government. It this is not paid, penalty is imposed. The payment of proper stamp duty imparts the document legality.

If the stamp duty is not paid within stipulated period, it attracts a penalty at the rate of 2% per month, which is calculated on the deficit amount of the stamp duty. However, according to the amendment that came into force from 01-05-2001, maximum penalty can be only 200% of the deficit amount on stamp duty.

Is stamp duty payable on all documents / agreements pertaining to transfer of immovable property?

All transfer instruments/ documents that include agreements to sell, gift deed, conveyance deed, deed of partition, mortgage deed, exchange deed, leave and license agreement, power of attorneys, agreement of tenancy, and lease deeds have to be stamped before registration. Only transfer of immovable property by will is not required to go under such process. If one has purchased a property in a co-operative housing society on or after 10-12-1985, the individual has to pay the stamp duty corresponding to the market value as specified in the Ready Reckoner. For a flat purchased on or before 9-12-1985, the individual needs to pay stamp duty if INR 5 only. However, such a property will require stamp duty to be paid corresponding to the market value at the time of property conveyance in favour of the society. When a nominee transfers a flat to his legal heirs, that transfer instrument too needs to be stamped as per the market value.

Who should be the purchaser of stamp paper?

As per the regulation of 01-05-1994, the stamp paper needs to be purchased in the name of one of the parties of the instruments/documents. If the agreement is prepared without getting the stamp paper in either of the parties name, it would be as good as no stamp paper used. However, the agreement does not become invalid and the agreement can still be enforced in law if the stamp duty is paid subsequently.

Is stamp duty payable on instrument or transaction?

Stamp duty is payable on the instruments and not on the transactions. The duty is charged based on the contents of the instrument only. It is imperative that all the information regarding the property such as the area of the floor, the number of floors, the valuation of the property and the year of construction should be mentioned in the instrument. This would facilitate faster stamp duty process.

In whose favour should the Banker’s pay order be issued?

The Banker’s pay order should be issued in the name of Superintendent of Stamps of the concerned region.

What is the next step after the stamp duty?

Once the stamp duty is paid on the instrument, the agreement needs to be registered with the sub-registrar of Assurances, of the jurisdiction where the property is located under the Indian Registration Act. The main purpose of the registration process is to record the ownership of the flat/property. Unless the title of the property is not registered in your name, you are not legally the owner of the property. For the registration of the agreement, an individual would need the original document along with two photocopies of the agreement to be submitted to the registering officer. The process would also require the presence of two witnesses as well as the payment of appropriate registration fees. Once the registration process is completed, a receipt that bears a distinct serial number is issued. The receipt mentions the following:

  • Market value of the property.
  • Income-tax clearance.
  • Registration fee.

The current registration fee that is fixed for registering property transaction documents is approximately 1% of the market value or the agreement value whichever is higher. The registration fee is subject to INR 3, 00000 to the maximum. The registration fee on immovable property transaction includes conveyance, exchange, gift, partition, transfer of lease by way of assignment, sale, power of attorney and authorization to the attorney to sell the property on which stamp duty is charged. helps its clients calculate the correct stamp duty amount for their property In addition, we also help the clients to draft flawless and legally correct stamp duty and registration documents as well as guide them in proper payment of the same within the stipulated period. We support our clients with proper Legal Advice from professionals on the panel.

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