Buying a home is easier than ever before in India. The government has introduced housing schemes to encourage the middle and lower classes to buy houses. Lenders are also simplifying the application process for home loans. But apart from the documentation for a home loan, there are other vital issues that homebuyers need to take care of. These include the home loan stamp duty and registration charges.
What is Stamp Duty?
Stamp duty is a one-time mandatory property tax. The buyer of the property pays this when there is transfer of ownership of the property.
Why is Stamp Duty Important?
Occupying the property does not entail ownership. You need to register the property in your name. And for that, legal paperwork has to be done. When you pay stamp duty on a property, the government records this in their property purchase transactions account. So, a house sale agreement on which stamp duty has been paid acts as evidence in a property dispute.
How to Calculate Stamp Duty Charges
The amount of the stamp duty is determined by either the market value or the agreement value of the property (whichever is higher). The higher the market or agreement value, the more will be your stamp duty. To set the value of a property, the stamp duty authorities use the Stamp Duty Ready Reckoner. This reckoner is published on 1 January of each year.
However, stamp duty charges vary from one state to another, and sometimes even within the same state. For example, Chennai has a stamp duty rate of 7%. Meanwhile, Mumbai has a stamp duty of 5% for property falling under the municipal zone and 4% for those outside that zone. You could use a stamp duty calculator to compute the stamp duty on a property you wish to purchase.
Other factors affecting the stamp duty are:
- Age of the property
- Owner’s gender—women pay less stamp duty
- Agricultural or non-agricultural land
- Freehold or leasehold property
- Residential or commercial unit
- Independent house or a multi-story apartment
What Happens in Case of a Delay in Payment of Stamp Duty Charges?
Ideally, you should pay the stamp duty immediately after all parties sign the house sale agreement. Payment should be made the day before, on the day of, or on the next working day with respect to the date of execution of the house sale agreement. What if there is a delay in the payment? In that case, the buyer will face a penalty of 2% of the pending amount per month plus the pending amount.
How to Pay Stamp Duty Charges
There are two common methods of paying stamp duty:
- Non-judicial stamp paper: Here, the details of the house sale agreement are printed or written on non-judicial stamp papers. These papers must be bought from licensed vendors and signed by the executants.
- Franking method: Here, the agreement is printed on a plain paper and submitted to the bank. The bank then processes the document through a franking machine.
However, the most convenient method to pay stamp duty and registration charges is online. State governments offer discounted stamp duty rates for online payments.
What is Registration?
Once you pay the stamp duty charges on a property, you have to register the document under the Registration Act, 1908. The registration should be done within four months of the execution of the sale agreement.
What is the Registration Fee?
A registration fee is charged over and above the stamp duty charges. This fee is levied to get the transferred property registered in the buyer’s name. The registration fee charged is 1% of the property’s market value or agreement value.
Make it a point to pay the stamp duty and registration charges on time when buying a new house. If you need financing for the perfect property, look at the home loan offers by different lenders. You can also check it out home loan stamp duty and registration charges to compute the value on a property you wish to purchase.