When you buy a property, whether its land, independent house or an apartment, you have to pay certain fees to get the property transferred in your name. The two main charges are stamp duty and registration charges apart from some minor court fees etc. Stamp duty and registration charges are collected by the respective state governments, and therefore, the rates vary from state to state. These are one time charges that you pay after the sale deed is executed. The papers are the proof of ownership of a property. In case of any dispute, property dispute lawyers would need these documents to prove your ownership in a court of law. Some important facts about stamp duty on property purchase or sale is discussed below.
Stamp Duty Rate
Stamp duty is calculated as a share of the worth of the property. Since stamp duty is collected by the states, the rates are different in different states. It varies between 4 to 10 per cent. Most states have different rates for urban and rural areas. Some states offer discounts to women property buyers. Registration charge is uniform across all states and is charged @ 1% of the value of the property.
Late Payment Penalty
Stamp duty is a one-time payment made at the time of registration of the property. If you do not pay the stamp duty on time you will have to pay an interest of 2% of the original liability per month as penalty till the time you make full payment. The penalty can be as high as two hundred per cent.
Methods to Pay Stamp Duty
Stamp duty can be paid in three different ways: through physical stamp paper, e-stamp paper and by Franking. All states don’t have all the three options, but wherever they are available you have the freedom to choose any one of them according to your convenience.
- Physical Stamp Paper: non judicial stamp papers of different denominations are available in the market. You will have to buy several of them to add up to the required stamp duty.
- E-Stamp: to counter the shortages and counterfeit physical stamp paper, e-stamp was introduced by the Government. It’s an online stamping method. Though this facility is available in all states, it’s compulsory only in few states. This method is convenient and hassle free.
- Franking: this is a process where an official mark or stamp is put on a document indicating that duty has been paid. It can be through an official franking agent or an authorized bank. Different states have different franking charges, which is over and above the actual stamp duty.
Stamp Duty on Purchase of Apartments
For apartment buyers stamp duty has to be paid on the basis of individual share of the property on which a project is built. For example if a project with 50 flats is built on a land measuring 1,00,000square feet, then each flat buyer has to pay stamp duty for 2000sq ft. Similarly, if the project consists of units of different sizes, stamp duty has to be paid proportionately.
Stamp Duty when Buyers Avail Home Loan
Earlier when buyers availed home loans to buy a property, banks only considered the value of the property to decide upon how much loan an individual could get, which generally ranged between 80 to 85 per cent of the value of the property and is known as loan to value ratio or LTV. Balance amount plus the stamp duty and registration charges was borne by the buyers. This extra burden deterred many prospective buyers from buying a house. Keeping this in mind the Reserve Bank of India has mandated all banks and housing finance companies to take into account the stamp duty and registration charges while calculating the LTV for a borrower. This facility is available for properties below Rs10 lakhs and has considerably eased the burden on the home buyers in this category.
For all categories of home buyers who avail of a home loan, a stamp duty on home loan agreement has to be paid. Borrowers have to submit all their property documents with the bank with an undertaking known as the ‘memorandum of deposit of title deed’. This is then registered and a stamp duty in the range of 0.1 to 0.2 per cent of the loan amount is paid.
It is important for every home buyer to know the above mentioned facts about stamp duty to safe guard their interests. Any lapse could lead to disputes in the future and you might need the services of property dispute lawyers to come out of the mess.
Amy Jones is a certified legal expert by profession and she is associated with Ahlawat & Associates-law firms in India. She loves sharing useful information about business, finance and law with needy people.