How Are Stamp Duty And Registration Charges Calculated?

Stamp duty is a tax levied by the government on purchasing a new property. It is covered under Section 3 of the Income Stamp Act and is charged to validate ownership details. In other words, it acts as proof of ownership by clearly mentioning the property owner’s name. 

The rate chargeable as stamp duty varies from one state to another. It can be anywhere between 5% and 7% calculated on the property value. The process of calculating it is simple, and one can also take the help of an online stamp duty calculator for this purpose. 

How to calculate the stamp duty charge on a property?

A stamp duty charge will depend on a property value. It is calculated on market value, circle rate or ready reckoner rate, whichever is higher. In addition to this, the stamp duty value may also change on the basis of a property type an individual holds. It means it will vary on whether it is commercial or residential and if it is located in a rural area or urban area. 

Here’s an example for clear understanding:

Suppose Mr A plans to buy a flat. The agreement value of this flat is Rs.70 lakh, while its circle rate is Rs.50 lakh. Then, its stamp duty will be calculated on the higher value, i.e., the agreement value of Rs.70 lakh. One can find this value by accessing a free online stamp duty calculator. Using this calculator, one can also view the exact charge by feeding in his/her state name and property value.  

Besides, other factors determine stamp duty charges as well. They are:

  • Property status (if it’s new or old)
  • Owner’s age (there are discounts for senior citizens)
  • Owner’s gender (females get a concession) 
  • Property type (whether it’s a flat or house)

When is an individual liable to pay stamp duty on a property?

An individual is liable to pay stamp duty on a property when buying a new property. The correct time to submit this payment is before making the transaction or on the next working day. Failure to do so may attract a penalty of 2% per month until the payment is clear. 

This percentage can even go up to 200% of the remaining amount. Apart from this, it will also affect the sanctioning loan process no matter if an individual has applied for a home loan or loan against property. 

Also, if an applicant is purchasing a house by taking a loan against property, they must know all about it. For example, know about loan against property eligibility criteria, terms, loan amount, etc. It helps to avoid rejections due to other causes. 

In addition, individuals must remember that a loan against property is very different from a home loan. So, to know which one will be a better option for them to purchase a new home, they may read its complete analysis. This difference mainly lies in the sanctioned amount, tax benefits and usage term. 

Who is liable to pay the stamp duty charge on a property?

The purchaser or transferee of a property is liable to pay stamp duty charges on a property unless otherwise mentioned. However, if one is exchanging properties rather than buying, in this case, both parties must pay stamp duty charges equally.

What are the ways to pay stamp duty?

The following are some of the ways one can pay stamp duty using either online or offline method:

  • Franking: This is an offline process where a property buyer has to go to an authorised franking agent’s office. The agent impresses a red mark using an instrument on the property paper, indicating that stamp duty has been paid successfully. There is a minimum amount one has to provide to complete this process. Officials later deduct this amount from the stamp duty value payable by home buyers. 
  • Physical stamp paper: This is a common way of paying stamp duty charges opted by many. Under this, the home buyers get stamp papers from authorised sellers and fill them with property details. However, if the stamp duty charge is high, this method becomes inconvenient as payers have to buy too many stamp papers. 
  • E-stamping: E-stamping is a widely accepted legal mode to pay stamp duty charges online. Individuals have to visit the SHCIL site for this purpose. Next, they must select the state in which they reside, fill up the application form available on the site and submit it along with the payment. Following this process, the site delivers an e-stamp certificate to the user, which is enough to verify one has made the payment. 

It is essential to pay stamp duty on time, and one can do this using any of the methods mentioned. If an individual fulfils this requirement, he or she becomes eligible to apply for property loan.

The loan amount helps make purchasing new property affordable for a borrower and provides him/her other associated benefits. One such benefit is pre-approved offers. Moreover, many financial institutes provide it to streamline the loan process for applicants and make it timeless. 

This is all the information one needs to successfully calculate and pay off his/her applicable stamp duty charge on the property. So, individuals must go through it thoroughly to avoid any misconceptions. 

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