Stamp Duty & Registration Charges in India | Kotak Mahindra Bank

25 JUNE, 2021

When you buy a house, it is not only the cost of property that you need to pay for. The stamp duty and registration charges for the property forms a part of the total purchase cost of the house. If you are looking to purchase a property anywhere in India, it is important for you to know about stamp duty and property registration processes and the associated charges.

What Is Stamp Duty?

Stamp duty is an indirect tax that you need to pay while purchasing a property. It is levied by the state government on the transfer of the property from the seller to the buyer. To prove that you own the property, you must possess the receipt of stamp duty payment for the transaction. You are not considered the legal owner of the property until you have paid the stamp duty for the property transfer and registered the sale agreement.

You need to pay the stamp duty irrespective of the type of property you purchase - under construction, or newly completed. Stamp duty is also levied on freehold or leasehold units, agricultural and non-agricultural land, residential houses and commercial units.

How Is Stamp Duty Calculated?

The stamp duty in India is calculated basis the market value of the property. The stamp duty to be paid is a percentage of the market value of the property, which is determined by the respective state governments. The gender and age of the owner, and location and usage of the property also affect the stamp duty amount. For example, many states have lower stamp duty for women and senior citizens. Sometimes a ready reckoner is also referred by the stamp duty officials to fix the price of the property. A ready reckoner is a standard value of a particular property decided by the state government. It is essentially the minimum amount at which the property can be sold at.

How Do You Pay Stamp Duty?

There are three ways through which you can pay stamp duty:

  • Physical stamp paper - You will need to purchase non-judicial stamp papers of the required value from a licensed vendor. The details of the transaction are then written on the stamp paper and are signed by both parties.

  • Franking - For this method, you would need to take the help of a franking agency or a bank that provides franking services. The document (for which stamp duty is to be paid) details are printed on paper and are stamped with the value of the stamp duty paid.  

  • E-stamping - E-stamping is an easy and hassle-free method to pay stamp duty. In this method, you can pay your stamp duty online through the Central Record Keeping Agency (CRA). Currently, the Stock Holding Corporation of India Limited (SHCIL) has been appointed the CRA for all e- stamps used in the country. SHCIL also has designated collection centres that you can contact for certificates. However, keep in mind that not all states in India have the facility of e-stamping.

 

Things You Should Know About Stamp Duty

  • The rate of stamp duty in India differs from state to state. For example, if you pay 4% in Delhi, it could be anywhere 1%-2% less or high in Maharashtra.
  • Stamp duty rates in India also vary basis gender. Some states levy lower stamp duty for women to encourage them to invest in properties.
  • You would have to pay a penalty if you fail to pay the stamp duty on the purchase of your property.
  • You can use the stamp duty calculator online to find the stamp duty applicable for your property.

 

Cost of Stamp Duty and Registration

If the market value of the property is in crores, the cost of stamp duty and registration can go up to lakhs of rupees. This is why experts opine that you should add the cost of registration and stamp duty in the overall cost of the property while making your budget or availing a home loan.

Tax Benefit on Stamp Duty

Stamp duty and registration charges are also eligible for deduction under section 80C of the Income Tax Act, 1961 up to Rs 1.5 lakh. Ensure that you take its benefit while calculating total tax liability. However, you can claim this deduction only for the financial year in which you have purchased the property.

Property Registration

After you pay the stamp duty, you are required to get your property registered with a sub-registrar under the Indian Registration Act, 1908. The property registration charges in India vary from state to state and are over and above the stamp duty cost. In most states in India, the property registration fee is 1% of the market value of the property.

Documents Required For Registration of Property

Typically, you would need to submit the following documents for registration of the property:

  • Identity proof like Passport, driving licence and PAN card for both the parties.
  • Sales deed - original and two photocopies
  • Proof of registration fee and stamp duty payment
  • Receipt of payment made to the seller
  • Khata certificate, if applicable.

 

FAQs

Do you need to pay stamp duty for property registration in India?

According to the land registration rules in India, it is mandatory to pay the stamp duty of the property for registration. Only when you have paid the stamp duty, can you register your property with a sub-registrar.

What if you pay a lower stamp duty?

Undervaluation of property in order to escape high stamp duty charges by quoting a low market value of the property is an offence and can lead to penalties or even imprisonment. Hence, it is crucial that the right stamp duty is paid while registering the property.

How much is the stamp duty on property in India?

Stamp duty on property in India is different from state to state. You should check with the state authorities to know the exact percentage of stamp duty applicable for your property.

Is it mandatory for the seller or buyer to be present at the time of property registration?

Yes. Both the buyer and the seller need to be present at the sub-registrar’s office at the time of property registration. If one of them is an NRI and is unable to show up, in that case, their legal representative holding a power of attorney needs to be present.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.