All About Stamp Duty And Registration At The Time Of Property Purchase

Investing in property is a good financial decision. It can give you handsome returns in less time. One needs to understand the financial as well as legal aspects while purchasing a property. The owner must have all the ownership documents related to the property. Possession of property physically does not make you the owner unless you don't have the legal papers conferring ownership rights.

One needs to get the purchased property registered in his name by paying the stamp duty and registration charges. Registering a property and getting the ownership transferred is a daunting task. An in-depth understanding of the stamp duty and registration regarding purchasing a property can simplify this task to an extent.

Stamp Duty

Property Stamp duty is levied by the state governments when one transfers the ownership of his property to another. It is a fee charged on the required documents for the registration of the property. Property Stamp duty accounts for 5% to 7% of the market value of the purchased property. It is mandatory to pay Property stamp duty during the registration of the property according to the Indian stamp act, 1899.

State governments have the right to fix the rate of property stamp duty. Hence, the rates of stamp duty differ in every state. In the past years, many state governments have reduced the rates of property stamp duty to encourage the real estate sector.

It is essential to pay stamp duty as it validates the registration agreement. You cannot become the legal owner of the purchased property unless you pay the stamp duty. You should record all the financial transactions while buying a property, whether it is paying stamp duty, registration fees, or other miscellaneous expenses. You can use the OkCredit app, which simplifies recording financial transactions by maintaining electronic ledgers.

Factors Governing Stamp Duty

• How old is the property: The amount of Stamp duty is significantly affected by the property’s age. One has to pay less stamp duty on old buildings and relatively more stamp duty on new buildings. Since market value is the key determinant of stamp duty and the market value of old buildings depreciates with time, lower stamp duty is charged on them.
• Purpose: The property is for commercial purposes, or residential purposes also affect stamp duty. High stamp duty is levied on commercial property, and lower stamp duty is payable on residential buildings.
• Owner’s age: The state governments have reduced the stamp duty for senior citizens. If the owner of the property is a senior citizen, the amount of stamp duty is less.
• Owner’s Gender: Female owners of property are also liable to pay less stamp duty than their male counterparts. State governments give special rebates to women owners, and they pay around 2% less than the male owners for getting the property registered in their name.
• Location: The location of the property is another important factor governing the amount of stamp duty. A property located in urban areas attracts higher stamp duty vis-a-vis properties located in the rural areas or outskirts of a city.
• Amenities: It is important to keep in mind that every amenity on the premises increases stamp duty. Government charges extra stamp duty for every amenity like lifts, gymnasium, swimming pool, club, etc.

Payment of Stamp Duty

Stamp Duty can be paid in the following three ways:

• Physical Stamp Paper: This is a very old method of paying stamp duty. If you choose this method, you have to buy a non-judicial stamp paper with impressive stamps from a person authorised to sell them. After buying the stamp paper, you have to get the transaction details typed on the paper. The drawback of using this method is that if you have to pay a large amount of stamp duty, you require multiple stamp papers. Nowadays, people do not prefer this method of paying stamp duty.

• E-stamping: With technology engulfing all the fields, paying stamp duty has also become digital. E-stamping or online stamping is very convenient. Many state governments have made e-stamping mandatory in case of property stamp duty. Stock Holding Corporation of India Limited (SHCIL) has been given the responsibility of e-stamping in India.

If you choose to pay stamp duty online, you have to go to the website of SHCIL. Then, you need to fill the application form and deposit it at the collection centre for e-stamping. You also need to pay for the stamp duty. You can pay through cheque, net banking, debit cards, credit cards, or demand drafts according to your convenience. After the payment, you would receive the e-stamping certificate. This method is widely used as it allows you to check the authenticity of your e-stamp online with the help of the UID number.

• Franking: Franking is a process in which a bank, as an authorised franking agent, stamps your document stating that the duty has been paid. An adhesive stamp is put on your documents by a franking machine. Then, your documents are franked, which means that you have paid the stamp duty.

If you opt to get your documents franked by a franking agent or a bank, you must pay a franking fee deducted from the total amount of stamp duty payable by you.

Registration of Property

After paying the stamp duty, one should also get the property registered under the Indian Registration Act. It is important to get the property registered with a registrar of the same place where the property is located. Registration of property makes you the legal owner of the property.

Registration Fees

The amount of registration fees differs from one state to another. State governments fix the rate of registration fees to be paid at the time of property purchase. In most of the states, it is 1% of the value of the property.

Some people under-value their property so that they have to pay less stamp duty and registration fees. You should refrain from such acts because you would be liable to pay a heavy penalty if caught.

Documents Required for Registration of Property

The following main documents are required at the time of registration of the property:

• Identity Proofs of the buyer as well as seller
• Original Sale Deed
• Two copies of the sale deed
• Proof of stamp duty paid
• Proof of registration fees paid
• Proof of amount paid to the seller

Conclusion

Purchase of property is a tedious task. It is difficult to find the ideal property. It is more difficult to arrange for payment of stamp duty and registration fees. As a law-abiding citizen, one should pay the stamp duty and registration fees to get the legal ownership title of the property.

It is very important to pay stamp duty as well as the registration fees because physical possession is of no significance if you don’t have the legal title of ownership. In case of any dispute, you are required to produce the legal documents of ownership in court to prove that you are the owner of the property.

Also read:

1) Presumptive Tax: Ways to File Returns & Save Taxes for Creative Professionals
2) The USA vs India: Taxation System
3) How does the Income Tax System work in India?
4) Capital Gains Explained: Definition, Types, Exemptions & Tax Saving

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FAQs

Q. How much is stamp duty to be paid at the time of purchase of a property?

Ans. The rates of stamp duty vary from one state to another. It ranges between 2% to 5% of the market value of the property.

Q. Who is liable to pay the stamp duty at the time of purchase of the property?

Ans. The buyer is liable to pay the stamp duty at the time of purchase of the property.

Q. How much registration fee is payable at the time of purchase of a property?

Ans. The state governments levy registration fees. In most of the states, it is 1% of the value of the property.

Q. Which method of paying stamp duty is most suitable?

Ans. You can choose any method to pay the stamp duty according to your convenience. Mostly, people prefer the e-stamping method.

Q. Can stamp duty be paid in instalments?

Ans. No, you can not pay the stamp duty in instalments.