Purchasing a house is one of the most planned decisions one needs to make. Apart from the monetary burden that comes with it, there are a lot of other things to understand and consider, especially if it is your first home purchase. It starts with selecting an ideal location with proximity to work and school, home loan application, making the down payment, sale agreement, etc. In addition, you have to get the house registered in your name after possession. You need to have legal evidence of ownership of the house.
This means that in the local municipal records it needs to be documented that the seller has transferred the property/house to you and when you do that, you are liable to pay a fee called the stamp duty to the government.
What is stamp duty?
It is a tax imposed by the government on the transfer of ownership of real estate/property. It is payable under Section 3 of the Indian Stamp Act, 1899 The extent of the stamp duty will be based on the value of the house/property at the time of registration. It further varies based on the state or area in which the property is located and if it is a new or old construction. Stamp Duty will be additional cost you incur when you set out to make a real estate buy and therefore it is important to understand its implication on the type and area of the house you intend to purchase.
Payment of Stamp Duty
- You need to make the payment in full.
- The payment of stamp duty needs to be completed on time or it attracts penalty.
- It is a legal document that can be held as evidence in court and has value.
- Payment of the duty has to be made before execution of the legal document, or on the day of execution or within one working day after that.
- Payment is usually made by the buyer of the property. In the case of property exchange, both the buyer and the seller will be liable to pay stamp duty equally.
- Penalty on incomplete payment of stamp duty will be charged at 2 percent per month, up to the maximum of 200 percent on the pending amount to be paid.
Execution of the Stamp Papers
- The stamp papers are to be purchased in the name of the buyer or seller and will be valid for 6 months from purchase, but only if the duty is paid on time.
- The person executing the document has to cancel the adhesive stamp by writing on or across it his/her name and initials. If not, the document will be considered unstamped. The stamp has to be clearly visible on it.
- The valuation officer can recall the document for lack of essential information. Mention information like the area of the house, year of construction, number of floors, etc to complete stamp duty process quicker.
- Stamp duty is payable on the transfer of all immovable property except those transferred by Will (or by original nomination in a co-operative housing society).
- When the nominee transfers the property subsequently to a legal heir, such a transfer has to be made as per market value.
- You are also required to submit all necessary documents for stamp duty like transfer instruments, deed of partition, reconveyance of mortgaged property, mortgage deed, certificates of sale, gift deed, exchange deed, tenancy agreement, power of attorneys, license agreement and lease deeds.