STAMP DUTY-10 Things You Should Know About Stamp Duty On Property Purchase
The paperwork involved in a real estate transaction, including stamp duty on property purchase that you have to pay, entails a fair amount of money getting spent. After all, it is these papers that stand as proof of your property ownership. Among the major costs are the one-time registration fee and stamp duty that you have to pay under Section 3 of the Indian Stamp Duty Act, 1899, after a sale deed is processed.
To help you understand how these work, looks at 10 aspects of stamp duty charges on property buying that all home buyers must know about.
Stamp duty rate
The rates at which stamp duty is charged in various Indian states at present range from 4 per cent to 10 per cent. Registration fees, on the other hand, stand at a standard one per cent across states.
Payment frequency and penalty:
Stamp duty is a one-time charge paid under Section 3 of the Indian Stamp Duty Act, 1899. If you fail to pay this charge, you have to pay the outstanding amount along with a penalty of two per cent of the outstanding amount per month. The penalty could go to as high as 200 per cent of the original liability.
Lower rates for women:
To encourage property ownership among women, many states charge lower stamp duty if the property is registered in a woman's name. In the national capital Delhi, for instance, woman home buyers have to pay four per cent of the sale deed value as stamp duty, even as the normal stamp duty rate here stands at six per cent.
Stamp duty on purchase of apartments:
Apartment buyers have to pay stamp duty charges based on the individual share of the property. This means if a project is built on 50,000 sq ft of land and units of similar sizes are sold to 10 people, each one of them has to pay a stamp duty charge for 5,000 sq ft.
In case of a dispute, the document showing you have paid the stamp duty acts as a legal proof of your ownership over the property. It should be noted that property registration papers are not counted as legal proof; they only prove that you paid a fee. This has also been a reason why many home buyers put the property registration work on the back burner. However, if you want to sell your property in future, it will be difficult for you to do so if the registration has not been done.
Though regulated by a Central Act – The Indian Stamp Duty Act, 1899 – stamp duty charges are collected by states, and these form a crucial part of their revenue collections. In fact, states have the Constitutional right to make any changes to the Act and have their own sets of rules in this regard. Stamp duty charges vary across states. And, even in a particular state, they might vary from one locality to another. Maharashtra, for instance, has the Bombay Stamp Act, 1958, that regulates stamp duty and property registration in the state. Other states like Gujarat, Karnataka, Kerala, Rajasthan and Tamil Nadu also have their own stamp duty laws.
Rate too high?:
Home buyers in India sometimes put off property registration because of high stamp duty charges. This severely hits the government's revenue collection and may also be a reason why land and property transaction records are in a poor state. Compared with other economies, stamp duty charges in India are high. According to a World Bank report, the countries like Philippines and Vietnam charge stamp duty in the range of one to two per cent.
Online stamp duty payments:
To simplify stamp duty payment and property registration, states like Maharashtra have initiated an online process for these. Many states have in the recent past also lowered these charges to encourage home buyers to register their property.
Home loan eligibility for low-income groups:
Earlier, banks did not factor in stamp duty and registration charges as a property's cost. Due to this, home buyers had to be ready with their own savings to pay for these. However, the Reserve Bank of India (RBI) in March 2015 directed banks to include stamp duty and registration chares while calculating a borrower's loan eligibility in cases where the cost of the property is up to Rs 10 lakh. The move was aimed at promoting housing among low-income groups and economically weaker sections. Banks now include stamp duty and other document work-related charges in the overall cost of a house while calculating borrowers' loan to value ratio (LTV). LTV is the ratio of the loan amount to the value of the property.
Stamp duty on home loan agreement:
You also have to pay stamp duty if you have availed of a home loan for buying a property. You have to deposit the property documents with your bank, along with an undertaking that you are submitting these papers at your free will to avail of the loan. Now, this undertaking, known as the memorandum of deposit of title deed, is registered and 0.1-0.2 per cent of the home loan amount is charged as stamp duty for this.
Stamp Duty On Property Purchase In Top Indian Cities:
When you set out to buy a property, you have to budget additional expenses that you would have to incur during the process that include stamp duty and registration charges.
From time to time, the Reserve Bank of India (RBI) has been nudging banks to factor in additional expenses on property purchase while granting home loans. However, banks typically offer only 80 per cent of the property value as home loan, without factoring in stamp duty and registration charges that increase the overall cost of the property significantly. Buyers have to depend on their own resources to make these payments.
In this article, we discuss in detail what stamp duty is and what are the charges in key cities in India.
What is stamp duty?:
Stamp duty is a fee on real estate transactions that has to be paid during the transfer of an asset from one person to another, based on the total declared value of the property. If stamp duty is charged at four per cent in your city, you have to pay Rs 4 for a property worth Rs 100. In India, stamp duty charges may differ from four to 10 per cent, from state to state. Rules in this regard are governed by Section 3 of the Indian Stamp Duty Act, 1899.
What are registration charges?:
Registration charges are a one-time fee that you pay for registering the property transaction in the government records. These are kept typically at one per cent of the transaction value, even as stamp duty charges vary from city to city, from an urban area to a rural area and from a male buyer to a woman buyer.
List of rates at which stamp duty is charged for the various types of buyers in the nine major cities of the country.
Stamp duty in Ahmedabad: If you are buying a property in Ahmedabad, you will have to pay a stamp duty at the rate of 4.9 per cent. This rate, in the industrial hub of Gujarat, is one of the lowest among the major cities of India.
Stamp duty in Bengaluru: In India's information technology capital, you need to pay a stamp duty charge of 5.6 per cent in urban areas and 5.65 per cent in rural areas. When compared to its other peers, property in Bengaluru attracts a lower stamp duty rate that most cities.
Stamp duty in Chennai: In the Tamil Nadu capital, for a property in Chennai, you will have to pay seven per cent of the total property value as stamp duty charges.
Stamp duty in Delhi: Stamp duty in national capital Delhi is six per cent. Women buyers, on the other hand, have to pay only four per cent stamp duty.
Stamp duty in Gurgaon: Stamp duty in Gurgaon is different for the different segments and types of buyers. While you have to pay a six per cent stamp duty for property in Gurgaon rural, the charges are kept at eight per cent for transactions in urban areas. For registering a gift deed, you have to pay a stamp duty of three per cent in rural areas and five per cent in urban areas. However, if the sale deed is executed in favour of a woman, the stamp duty charges in Gurgaon are four per cent in rural areas and six per cent in urban areas.
Stamp duty in Hyderabad: You have to pay a stamp duty of 7.5 per cent to buy a property in Hyderabad, the city of Nizams.
Stamp duty in Kolkata: In the West Bengal capital, for a property in Kolkata panchayat area you have to pay a stamp duty of five per cent of the value of the property, and six per cent in municipal areas and corporation areas. You have to pay an additional one per cent stamp duty in both urban and rural areas, if the market valueof the property exceeds Rs 40 lakh.
Stamp duty in Mumbai: After the state recently slapped a one per cent surcharge on property transactions, stamp duty in Mumbai has gone up to six per cent.
Stamp duty in Pune: Homebuyers have to pay five per cent as stamp duty in Pune.
Stamp duty in Noida: Noida homebuyers have to pay five per as stamp duty.
||Rate (in %)
POWER OF ATTORNEY
NO PROPERTY SALE ON POWER OF ATTORNEY
Property sales through the common practice of general power of attorney (GPA) will not give ownership title to the buyer. In a landmark judgment that is expected to send a large number of property owners into a tizzy, the Supreme Court held that the GPA method of immovable property sales is not a valid form of transfer of property.
A three-judge bench presided over by Justice R. V. Raveendran said that property can be lawfully transferred only through registered sale deeds. A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property.
However, the bench said the judgment will not affect “genuine transactions” under the GPA.
The judgment delivered on Wednesday would have an impact on both freehold and leasehold properties and affect the mode of transfer of property in Delhi and the National Capital Region (NCR) where GPA sales are very common. Even though it can cause some hardship to those who have already purchased property through the GPA, the order will help curb evasion of duties, the flow of black money into real estate and also save people from being cheated by unscrupulous owners selling the same property to several people.
The court’s decision will help to curb the circulation of black money to some extent in the real estate sector where titles are manipulated. Besides, many property transactions where prices are rounded off will be affected. However, overall there won’t be any significant impact on normal property sales.
The apex court said there can be no mutation of property in municipal and revenue records on the basis of such documents. The bench, however, clarified that its order should not be a ground for disturbing mutations already affected by the Delhi Development Authority (DDA) or any other authority.
But, there is little relief for thousands of people who hold property without mutation as GPA sales can only be treated as existing sale agreements. An application of the order with prospective effect would have protected their interest. The court, though, stressed that it had merely reiterated the well-settled legal position that such transactions cannot be treated as completed transfers.
The court could not make the order applicable with prospective effect as it had not laid down any new law. However, it said that those who had already bought property through GPA before its judgment could use the documents to apply for regularization of allotments and leases by development authorities.
Nothing prevents affected parties from getting registered deeds of conveyance to complete their title. The said transactions may also be used to obtain specific performance or to defend possession under section 53A of TP (Transfer of Property) Act.
In order to ensure that GPA continues to serve its purpose, the court said its judgment will not affect the validity of sale agreements and powers of attorney executed in genuine transactions.
A person can enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings. In that connection, he can execute an agreement of sale and grant a power of attorney that will allow the developer to further sell the property to prospective purchasers.
While hearing a matter on the subject, the court had decided to clarify the law on the issue as such transfers had not only led to evasion of stamp duty and registration charges but had also provided scope for investing black money in real estate. Besides, such transfers were giving nightmares to bona fide purchasers as the same property could be sold to several people in the absence of verification or certification of title. A proper verification of ownership was possible only if all property were transferred through registered sale deeds.
Noting that such transactions were now not just limited to Delhi but had spread to neighboring areas, the court had sought the views of the Centre and the states of Delhi, Haryana, Punjab and Uttar Pradesh. There was a near unanimity that such transactions should be discouraged as it caused loss of revenue and increased litigation due to defective titles.
Going into the legality of such transfers, the court said any contract of sale which was not a registered sale deed would fall short of the requirements of the relevant provisions of the Transfer of Property Act and could not confer any title.
The court said a transfer of property by way of sale could only be by a sale deed.
In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred.