Buying your first home is a complicated, step-by-step process that involves numerous hidden costs. Stamp duty is one example of such an expense. It is one of the costs associated with purchasing a new home. This cost is included in any property-related financial transaction in India. So, what exactly is it, and how can it influence your home-buying decision? Let’s take a closer look at why you need to account for it when purchasing a new home.

It is important to note that stamp duty and registration fees are not included in the home loan and must be paid by you. Thus, making it one of the major reasons why you should consider it in your home-buying decision.

Stamp Duty is a tax levied on the sale or transfer of the ownership of a property. Physical possession of a property does not constitute legal ownership. To be considered legally yours, the property must be registered in your name.

Stamp duty is collected by state government to legalise your registration agreement. State governments impose a tax on the sale or ownership of all property within their jurisdiction. A ‘stamp duty paid’ label on your registration document is required for it to serve as a legal record of your property ownership.

Unless otherwise agreed, the stamp duty is usually paid by the transferee. Stamp duty is due whether the property is under construction, finished, or resold.

Under Section 3 of the Indian Stamp Act, 1899, stamp duty is a tax levied by respective state governments on all property transactions within India. The Indian Stamp Act contains detailed provisions regarding stamp duty payment, valuation for stamp duty payment, mode of payment of stamp duty, and so on. Stamp duty is a state subject under the Indian Constitution (Entry 63 of State List-II), and it varies from state to state since it’s not constant. A properly stamped document or instrument has evidentiary value and is admissible in court of law.

As previously stated, stamp duty varies by state and is also determined by the value of the property or the circle rate, whichever is higher as determined by each State Government. It varies depending on the type of property, such as commercial or residential, rural or urban areas. Furthermore, there are numerous factors that influence the stamp duty on a specific property.

Factors Influencing Maharashtra Stamp Duty and Registration Fees

In Maharashtra, stamp duty and registration fees are calculated based on location and ready reckoner rates. The following are some of the major factors influencing Maharashtra stamp duty and registration charges.

• Type of Property: The type of property affects stamp duty and registration charges in Maharashtra. For example, a buyer may pay less stamp duty on a residential property than on a commercial property.
• Age of the Property: The age of the property is also important when calculating stamp duty and registration fees in the state. An individual investing in an old property may pay lower stamp duty charges than a person investing in a new property.
• Age of the Buyer: The age of a property is a crucial factor in determining the stamp duty and registration fees in Maharashtra.
• Property Location: The location of the property can also affect the stamp duty and registration charges in Maharashtra. Stamp duty charges in Maharashtra are based on reckoner rates that vary depending on the property’s location.
• Gender of the Buyer: State governments in India are required to charge women a discounted stamp duty fee.
• Amenities available in the property: Stamp duty charges are also influenced by the amenities available in a property. A building with more amenities is subject to higher stamp duty fees than one with fewer amenities.

Although stamp duty is a one-time fee, failure to pay on time may result in penalties. You might have to pay the overdue amount plus a penalty of 2% interest per month on the deficit amount or the fine could be up to 200% of the original liability.

How is it distributed to the government?

Prior to digitization, stamp duty had to be paid in person at the sub-registrar’s office, following a lengthy process. While this option still exists, it can now also be paid online, offering a more convenient and efficient method while also deterring counterfeiting.

Currently, Stock Holding Corporation of India Limited (SHCIL) handles all online registrations in India, apart from Mumbai. Online payment of stamp duty in Mumbai must be paid through the Maharashtra Government’s Government Receipt Accounting System (GRAS).

There are three options for paying the stamp duty on your new home purchase.

• e-Stamping: e-Stamping is the quickest and most convenient way to pay online.
• Non-Judicial Stamp Papers: One of the traditional methods of payment is to go to the nearest sub-registrar office.
• Franking: Franking is the process of imprinting your sales contract with a red mark using government-approved automated franking machines.

You must pay it before the execution of your property document, or at the very least on the next working day of execution. By execution, we mean the signing of property transfer documents by the parties involved in the transaction.

Stamp duty and the additional taxes in Maharashtra:

There is a cess/surcharge payable in urban areas within Municipal Corporation or Municipal Council limits. This is 1% of the property value and is intended to be used to fund urban transportation infrastructure projects such as metros, bridges, and flyovers.

In rural areas under Gram Panchayat jurisdiction Zilla Parishad cess replaces the surcharge. This tax is also 1% of the purchase price of the property.

An extra 0.5% surcharge is applied to properties under the administration of the Nagpur Municipal Corporation (NMC) and the Nagpur Improvement Trust (NIT). This is in addition to the 1% cess/surcharge.

Stamp duty, cess/surcharge, and registration fees paid are eligible for income tax deductions under Section 80C of the Income Tax Act. Section 80C of the Income Tax Act of 1961 permits a total deduction of Rs. 1.5 lakh.

Conclusion :

Stamp duty is a tax under Section 3 of the Indian Stamp Act, 1899 that must be paid when registering a legal document with the government. It is applicable to all legal property transactions.

Stamp duty is levied on a variety of documents, including property sale agreements and rental agreements, among others, and serves as legal proof that the purchase of a property has been completed and registered in the owner’s name. The Stamp Duty rate varies by state. It is based on the current ready reckoner rates or the current market value or consideration value of a property, whichever is greater. There is also a list of factors that influence the stamp duty on a specific property.

Stamp Duty, being a mandatory charge that comes with the legal purchase of a property, has a significant impact on the overall cost of the property. As a result, you should familiarise yourself with the current Stamp Duty rates in the state in which you are purchasing a home.