Buying a home is one of the most significant financial decisions one makes. Once you are ready with the funds and have selected the property of your choice, the final step is getting the possession and registration of the property. Registration is must to become the legal owner of the property. Your property is registered in your name in the local municipal records, with the seller documenting the property being transferred to you. At the time of this registration, you must pay stamp duty and registration charges. Therefore, if you plan to purchase a property, you must have a fair idea about the stamp duty and other related charges.
What is Stamp Duty?
Stamp duty is nothing but a direct tax imposed by the government – it is payable under section 3 of the Indian Stamp Act, 1899 on all financial transactions including bills of exchange, letters of credit, promissory notes, letters of credit as well as all property transactions. These legal documents help to establish the liabilities and rights of the parties that have signed the contract. Stamp duty can be used as proof of possession in a court of law against the selling or purchasing of a house. Delay in paying stamp duty by the purchaser can result in a fine.
When is Stamp Duty Payable?
Stamp duty is payable before the execution of transactions or once the purchase/sale of the property is done or finalised. Stamp duty can also be paid on the next working day after the execution of the transaction. Any further delay in the payment of stamp duty will result in a fine of 2% per month to a maximum of 200% of the remaining amount. Therefore, as a purchaser, you must make sure that the stamp duty is paid in full and on time.
Who is Liable to Pay Stamp Duty?
It is the purchaser/ transferee of the property who must pay the stamp duty unless there is an agreement mentioning otherwise. However, in the case of the exchange of properties, both parties are liable to pay stamp duty equally.
How is Stamp Duty Calculated?
Stamp Duty is calculated based on the value of the property or the ready reckoner rate, whichever is higher. It is affected by:
- Location of the Property – The location of the property determines the stamp duty imposed on it. Some places are charged higher stamp duty rates as compared to others.
- Age of the property – Stamp duty charges on old properties are low as compared to new properties. This is simply because stamp duty is charged on the property’s value and old properties usually cost less as compared to new ones, which leads to lower stamp duty.
- Usage of the property – Stamp duty charges vary depending on whether the property in question is being used for residential or commercial purposes.
- Owner of the property – Stamp duty charges also vary depending upon the gender and age of the property owner.
How to Pay Stamp Duty?
Now that we know what is stamp duty, we need to understand how to pay it. Stamp duty can be paid in the given ways:
- Stamp Paper – The most prevalent method of paying stamp duty is with the help of stamp paper. In this case, an individual must purchase a stamp paper from an authorized vendor and get the terms of the agreement printed on the same. Both the buyer and seller sign the document and within four months of signing the stamp paper, the buyer gets the property registered under their name.
- E-stamping –It is the process of paying the stamp duty online. After the purchaser has successfully applied for e-stamping and paid the stamp duty, they get the e-stamp certificate with a unique Certificate Number (UIN) that can be downloaded and used for future reference.
- Franking – Franking is the process of getting the documents stamped. The agreement here is printed on plain paper and then taken to the Bank or a franking centre. Here, the documents are verified by the authority and the stamp duty needs to be paid. The authorities stamp the papers once the payment is complete. Only after franking, can the buyer and the seller sign the documents. Some may even consider buying printed stamp papers that have already been stamped.
Final Words
Before purchasing a property, it is important to know what is stamp duty and how it should be factored in while planning the budget for purchasing a home. A stamp duty calculator tool can help to calculate the stamp duty in different states.