Stamp Duty Refund Process for Canceled Sales Deed: Rules, Charges, and Claim Application

09 DECEMBER, 2022

Stamp Duty is a tax imposed on purchasing transferable property in India. It includes properties bought and sold, as well as additional properties part-exchanged. Tax rates differ based on the type of property you are purchasing and if it is within the First Home Owners Grant (FHOG). Read on to learn more about how stamp duty works, the stamp duty refund process, and more!

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.

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 a tax imposed on transfers of real estate properties and most legal transactions via land loan registration authorities in India.

How Is Stamp Duty Calculated?

Stamp Duty is calculated based on an agreement between the buyer and seller and the property type and price. The tax rates vary for different categories. Whether it is a first-home buyer or second-home buyer that you are looking to purchase from, there will be a tax on top of all other charges involved during this transfer process.

When an agreement is made between two parties, the property is already registered at a Land Records Office, and the Stamp Duty is 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 Land Records Offices/RTOs, 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 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 seller does not have a title to sell or has no power to sell at all.
• The seller is an undischarged bankrupt.
• The seller has a criminal conviction.
• The seller has been convicted of an offence punishable with a prison term lasting more than three months or a heavy fine.
• The buyer fails to deliver the property to the local government by the due date under the registration process of the sale deed.
• 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).

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

1. Submit a written request to the concerned Deputy Commissioners with all your documents (certified copies) within 30 days of cancellation.
2. 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).
3. After receiving the order, you must take all steps towards the delivery of the property to a new owner within 30 days.
4. 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).

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.