Know about Stamp Duty and Registration While Buying a House

Updated: January, 2018 As much as you would love to be a proud owner of your dream home, tedious documentation and registration procedure does not make the journey any easier. The physical possession of a property does not alone determine the ownership. All the necessary documents and legal papers should also indicate clear title. The legal acquisition of a property requires the homeowner to pay stamp duty and carry out registration of the documents. Let us understand in detail how it works.

Stamp Duty

What is stamp duty?        

Stamp duty is a kind of property tax, that needs to be paid when the property changes hands. It is similar to the sales tax or income tax collected by the government. When you buy land or a house anywhere in India, you need to pay stamp duty based on the value of the transaction.

Why should you pay stamp duty?

A house sale agreement, on which the stamp duty has been paid, acts as a legal evidence in the court in case of a dispute. It is proof that a property is officially registered in your name. When you pay stamp duty, it is automatically recorded in the property purchase transactions maintained by the government. The non-payment of stamp duty will take away the value of the deal.

What will happen in case of delayed payment of stamp duty?

Stamp duty should be paid before, on the day or the next working day of the execution of the sale agreement. That means, stamp duty should be paid immediately after all parties sign the sale agreement. If it gets delayed, you would be required to pay a penalty of 2% every month on the deficit amount of the stamp duty, subject to the maximum rate of 200%.

How is the stamp duty calculated?

Stamp duty is calculated on the market value or the agreement value, whichever is higher. Further, it is payable only on the contents of the registration document, and not the transaction value. Stamp duty is levied on every agreement and not on every person involved in the transaction. To assess the market value, stamp duty authorities refer to the Stamp Duty Ready Reckoner, which is issued on 1^st January every year by the government. Stamp duty charges vary from state to state. The amount also depends on several other factors like:

• Old or new property
• Rural or urban property
• Male or female property owner
• Agricultural or non-agricultural
• Freehold or leasehold
• Residential or commercial units
• Multi – storied apartments or independent houses

For example, Tamil Nadu charges the stamp duty @ 7%. However, in Rajasthan, the figure stands @ 5%, 4% and 4% respectively for general, female and disable categories. If you are buying a flat, the stamp duty is payable on the basis of the Undivided Share (UDS) of the property. So, if there are 5 equal sized apartments made on 5000 sq feet land, then each member needs to pay stamp duty for 1000 sq feet area. You can visit the official website of your respective state government to know the updated stamp duty charges and other related details.

How to pay stamp duty?

There are three officially recognized ways of paying stamp duty:

1. Non- judicial stamp papers

This is one of the most common methods to pay stamp duty. Here, all the details pertaining to the agreement are either written or printed on the non-judicial stamp physical papers purchased from a licensed vendor. The value of stamp papers will be equal to stamp duty applicable. After ensuring the correctness of the content, the stamp papers are duly signed by the executants.

2. Franking

In this method, the agreement details are printed on a blank paper and submitted along with the stamp duty amount to a bank authorized to carry out a franking transaction. A special adhesive stamp equivalent to the value of stamp duty is then affixed by the bank on the document with the help of a franking machine. The bank may charge a fee for this service.

3. E-stamping

This is a digital system of paying stamp duty, making it a highly secured and tamper proof option. These are the steps you need to follow:

1. Log onto the official website (shcilestamp.com) of Stock Holding Corporation of India Limited (SHCIL).
2. Make the payment through NEFT/RTGS or cash/cheque/DD deposit at any of the SHCIL branch offices.

You will then get an e-stamp certificate bearing the issue date, type of stamp duty, unique certificate number (UIN) and 6 character alphanumeric string. However,the e-stamping facility is available in only certain states, the details of which you will get from the SHCIL website.

Registration

What is registration?

After you pay the stamp duty, the document needs to be registered under The Registration Act, 1908 within four months from the date of execution.The registration is done by the Sub Registrar of Assurances of the jurisdiction, where the property is purchased. An entitlement to the said property is invalid unless the registration is completed.

What is the registration fee?

The registration fee is over and above the stamp duty charges. It is incurred to get the property transferred and registered in your name. The fee is either 1% of the market value or the agreement value, whichever is higher, however, subject to a maximum amount of Rs. 30,000. This fee varies from state to state.

What is the procedure to register a property?

To register a property, the original document needs to be printed on a side and submitted with two photocopies of the original to the registering officer. Both buyer and seller, along with two witnesses should be present during the registration. You will also need to carry an ID proof and a proof of stamp copy, if already paid. After the procedure is complete, a receipt bearing a distinct serial number is issued.

Here are a few tips to Save on Stamp Duty and Registration Charges:

Yes, you have read it correctly!  You can reduce the stamp duty and registration on your agreement in any of these three ways:

1. Register the property in the name of a female family member, if the rebate is allowed in the state, where the property is located.
2. Claim the amount up to Rs. 1,50,000 paid on stamp duty and registration as a deduction under section 80C.
3. Register the property at the ready reckoner prices published by the government. This reckoner is also called circle rates or guidance value. These are the base prices, and always lower than the actual market value of the property. Selling or buying below the base prices would be deemed a black money transaction. Both seller and buyer can reap the advantages by agreeing to a ready reckoner price. The seller can save on the Capital Gains Tax while the buyer can reduce his overall cost of the property acquisition. This is a legal method, and hence safe.

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