When ownership of a property is considered, there are certainly many taxes levied by the Indian government. ‘Stamp Duty” is one of those necessary taxes, the payment of which is compulsory for transfer of rights of a property. However, there are still many people who are unaware of the calculation of these taxes and the rates they are charges at. And in this content, it is going to be a major part of our discussion.
Every transaction of property, i.e., purchases and sale of property include the payment of stamp duty. This is a tax levied by states, therefore, possesses varied rates. Moreover, this tax is applicable on transactions of commercial, residential, leasehold and freehold properties. And this makes it an important consideration among taxes.
Calculating Stamp Duty payable
Stamp duty generally lies between the rates of three to ten percent as per the decisions of the respective state. Normally, the buyer of the property is held liable for the payment of stamp duty. Stamp duty will always be calculated on the circle rate and the agreement rate of the property whichever is higher. For instance, the circle-value of a property is Rs. 70 lakhs and the value mentioned in the agreement is Rs. 80 lakhs then the stamp duty would be calculated on the higher amount which is Rs. 80 lakhs.
Factors affecting the rates of stamp duty
There are several different factors that are known to affect the stamp duty rates for a property. Those are mentioned below:
- Status of property: the calculation of this tax will consider whether the property is new or old. This will affect the rates and charges.
- Location: The location of the property is also a matter of consideration. Whether the property is located in metropolitan, rural, suburban or city area will determine the changes and calculation of stamp duty.
- Age and gender of the owner: Whether the owner is a male or female and whether he is a senior citizen will also determine the charges. There are some concessions for senior citizens and also for women owners.
- Purpose of purchase: Stamp duty payment will also depend on the usage of the property, i.e., for commercial or residential purpose.
- Type of property: The calculation of stamp duty will also consider whether it is a flat or an independent property.
Payment of stamp duty and effects of inadequate payments
There are several different ways in which you can pay off stamp duty.
Non-judicial stamp paper method: In this method, the agreement is conveyed on the stamp paper which is then signed by the parties involved. Further, this act has to be registered at the sub registrar’s office within four months.
Franking method: under this method, the agreement would be printed on plain paper. Then this document is to be submitted to an authorized bank where the documents are processed further through a franking machine.
E-stamping: As the name suggests, in this method the complete procedure is conducted through the internet.
When payment of stamp duty is derisory
There are many people who show false values of the property to lower the payment of taxes. However, this tax evasion is a reason for losses to the government. If caught, this tax evasion is subjected to heavy penalties and punishments for the property owner. These punishments and penalties are known to vary as per the policies of different states. Apart from the minimum penalty level, this penalty can range from eight to twenty percent of the actual stamp duty. Also as per the state rules, the owner may be imprisoned for a certain period.
Saving on stamp duty charges
As per different provisions of states, there are several discounts on stamp duties for women owners of properties. And if you are looking in to get exemptions or deductions in stamp duty, then the only way is to register the property in the name of your wife or any other female member of the family. Also, you can have a view on difference in the stamp duty payable for different areas and make a purchase in the locality where stamp duty charges are low. There are many developers who take up the responsibility of paying the stamp duty. However, you need to be aware if this amount is charged from you in indirect ways.
Even the real estate sorority is trying to avail the exemption of stamp duties for the properties under affordable housing. The happening of this will let the owners save a significant amount on purchase of property.