Stamp Duty Refund & Registration Charges: Status, Process, Rules, Exemption

Stamp Duty is a tax imposed on purchasing transferable property in India. If you have canceled a sale deed in India, you may be eligible for a refund of the stamp duty that you paid. The stamp duty refund process is relatively straightforward, but there are a few things you need to know in order to get your money back.

What is Stamp Duty Refund, Cancellation & Registration Charges in India?

If you've ever decided to dabble in the property market, you've likely heard of stamp duty. But what happens if you choose to walk away from a deal? Here are things that you would find helpful.

As discussed, stamp duty is a tax levied on property transfer in India. But did you know that you can cancel it even after paying the stamp duty?
In case of cancellation within six months, the applicant can get a stamp duty refund after a 10% deduction.
Registration charges are fees charged by the authority for recording property ownership. The registration charges vary by state and transaction type in India.

How Does Stamp Duty Work?

Before you purchase a property in India, you must pay stamp duty for the transfer of ownership. Stamp duty or registration charges are taxes imposed on transfers of real estate properties and most legal transactions.

How Is Stamp Duty Calculated?

Stamp Duty is calculated based on an agreement between the property type and price. The tax rates vary for different categories. For example, the stamp duty rate for agricultural land is typically lower than the stamp duty rate for residential property.

When an agreement is made between two parties for the transfer of property, the property must already be registered at a Land Records Office, and the Stamp Duty must be paid.

What happens if you cancel the new purchase?

As per the law, if you stay true to your side of the contract and have paid the Stamp Duty for that property, then there is no way you can revoke or withdraw your payment.

The stamp duty amount is certified by the Sub-Registrar or District Registrar, depending on the state in India, which will be recorded in their books. You cannot withdraw this payment or avoid paying it once it has been registered against your property's name. However, if the agreement was cancelled due to a death in the family or job relocation, you will be able to withdraw the payment successfully.

What Does Sales Deed Refer To?

A sales deed is the document signed on completion of a sale transaction. It formally documents that you are a full owner of the property. Also, a sales deed is a legal document used during a property transaction as evidence of the sale and transfer of property ownership.

What Does Deed Cancellation Mean?

A deed cancellation occurs when a property sale transaction does not happen, such as when one of the parties fails to proceed with their end of the bargain. The buyer can cancel a sales contract and initiate claims for reimbursement when any one of the following events occur.

The legal ownership of the property is not clear, or the seller does not have the power to sell the property
The seller is bankrupt and has not been discharged of their debts.
The seller has been convicted of a criminal offence with a sentence of more than three months or a heavy fine.
Failure to complete the registration process of the sale deed and deliver the property to the local government within the specified timeframe.
There is a change in motives on behalf of one party or both parties in respect of their intentions before the signing of the agreement, such as misrepresentation, duress and undue influence leading to non-performance.
Non-performance by either party (seller and buyer).

The Sale Deed Cancellation Process

Backing out of a property deal? Let’s walk through the process.

Steps to take:

Take legal advice.
Review the sale deed.
Send a legal notice.
Attempt mutual agreement.
File a lawsuit if necessary.
Attend court proceedings.
Obtain a court order for cancellation.
Apply for deed registration cancellation.
Acquire a cancellation certificate.
Inform concerned parties.
Update property records accordingly.

The Documentation Trail:

Original Sale Deed.
Legal Notice copy.
Court Order.
Application for Cancellation.
Affidavit stating reasons.
Identity proof.
Property tax receipts.
Encumbrance certificate.
Property Possession Certificate.
Additional documents as per local laws.

Stamp Duty Refund Process When a Sale Deed Is Cancelled - A Brief

Whenever a sales deed is cancelled, the property buyer can get a refund of 98% of the stamp duty when an application is made for a refund. You must attach the original agreement and the original cancellation deed with the refund application for registration. You can also get tax exemptions on your mortgage loan interest rates under Section 80C.

When to Make a Stamp Duty Refund Claim?

You can apply for a refund when your property sale contract has been cancelled within a month of the registration of the sales deed. When you cancel the contract after a month from the registration of the deed, you will not be eligible for a refund or reimbursement.

How Is Stamp Duty Repaid?

Since not all property deals go through, you can get a full refund of the stamp duty you paid when signing the agreement. You only need to provide evidence that one of the reasons mentioned above occurred, and you will get reimbursement.

Steps to Follow to Reclaim the Stamp Duty on Cancellation

Submit a written request to the concerned Deputy Commissioners with all your documents (certified copies) within 30 days of cancellation.
The Deputy Commissioner will present your claim to the State Government. They will decide whether to pay partial or full refunds based on your previous expenditures and their current rules (called Orders).
After receiving the order, you must take all steps towards the delivery of the property to a new owner within 30 days.
Following the refund payment, you will receive an amount in your bank account within 15 days.

Things to Take Note of before Signing Any Deed

Remember to keep the following things in check, before signing a sales deed.

Seller's Details: Name, address and identity proof, email id, mobile number, and phone number of the person you are dealing with for land loan or building title.
Find out how much you will have to pay for stamp duty on your purchase price.
Compare this to the amount you will have to pay in stamp duty when you purchase it as a gift or you can use the calculator from your registrar.
Consult a lawyer to ensure everything is fine and the stamp duty refund deal will not be challenged by any other side (buyer's solicitor).

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Frequently Asked Questions

1. How Does Cancelling a Sale Deed Impact Stamp Duty?

If you pull back on a sale deed, you don’t necessarily lose out on the stamp duty you’ve already shelled out. You can ask for a refund but expect to get back just a fraction deducted from what you paid.

2. How Much Time Does It Take to Get a Stamp Duty Refund?

Well, this isn’t a quick process. Depending on the specifics and paperwork, it can take anywhere from a few weeks to 6 months.

3. Are There Legal Consequences to Cancelling a Sale Deed?

Absolutely. Cancelling is within your rights, but if someone feels deceived, they might challenge you in court. It’s always good to keep a legal expert in the loop.

4. What’s My Next Step if My Stamp Duty Refund Is Delayed?

Begin with an enquiry at the sub-registrar's office. If that doesn't help, consider getting a lawyer involved or touching base with senior officials in the revenue department.

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Conclusion

When you buy a property in India, you need to be mindful of how stamp duty works and its possible implications. Remember, there are rules for stamp duty refund just like any other payment, and when you are going through a real estate auction company, the chances of refunding the entire amount to your bank account is high.