Stamp Duty and Registration Charges: Rates, Payment & Calculation

Stamp duty and registration charges are two vital factors you must know if you make real estate deals. It is crucial for buyers to understand how these charges are determined and settled. Continue reading to know:

• What is stamp duty?
• What are registration charges?
• Stamp duty rates in India
• Transactions for which stamp duty is paid

What is Stamp Duty & Why is it Required?

Stamp duty is an indirect tax imposed by both state governments and the Union Government of India on specific financial and legal transactions. Paying stamp duty is crucial for ensuring a document's legal validity and admissibility in court.  

Beyond its primary role in document authentication, stamp duty also serves as a significant revenue source for governments. The levy of stamp duty is regulated by the Indian Stamp Act of 1899, alongside individual state-level stamp acts that govern its application within each state.

What are Registration Charges?

After stamp duty is paid, the local sub-registrar registers every property transaction document to transfer ownership of that property legally. Without this registration, the property documents have no legal validity.

Registration charges are the fees paid to the government for completing the registration process. The registration fee is calculated based on either the market value or the agreement value of the property, whichever is higher.

Stamp Duty Act

The Indian Stamp Act, 1899 provides rules relating to stamp duty in India. Additionally, state-specific laws also regulate stamp duty. The Indian Stamp Act provides the instruments for which stamp duty is applicable, how to pay stamp duty and who should pay the stamp duty.

Transactions That Attract Stamp Duty

The Indian Stamp Act of 1899 and various state-level stamp acts outline specific transactions requiring stamp duty payment. Below are some key transactions subject to stamp duty:

• Sale or transfer of immovable property, including land and buildings
• Rental and lease agreements for residential, commercial, and industrial properties
• Legal documents, including affidavits, power of attorney, partnership deeds, and memoranda of understanding
• Loan agreements, mortgage deeds, and promissory notes

Who Needs to Pay Stamp Duty?

In most financial transactions, including property transfers, the buyer typically bears stamp duty. However, when the property is transferred through a will, the buyer is exempt from paying stamp duty.

For most legal agreements and transactions, the party executing the document is generally responsible for paying the stamp duty to the government. 

How to Pay Stamp Duty & Registration Charges?

You can pay the stamp duty charges either online or offline using the following methods.

Physical Stamp Paper

This is the most common method for paying stamp duty. You can purchase stamp papers from authorised vendors and write down the details of the property registration or agreement on them. 

However, this method can be cumbersome for transactions involving high stamp duty amounts, as multiple stamp papers may be required.

Franking

In this method, an authorised franking agent stamps the property documents to indicate that the stamp duty has been paid. A minimum stamp duty amount is usually required for this method, and the agent charges a franking fee, which is deducted from the total stamp duty payable. Many banks offer franking services to homebuyers.

E-Stamping

E-stamping is the most convenient option for paying stamp duty, as you can do so online through the Stock Holding Corporation of India (SHCIL) website. 

To complete the process, visit the website, select the state of the property, fill out the application form, and submit it to the designated collection centre along with the required payment. Once the payment is made, an e-stamp certificate with a Unique Identification Number (UIN) is issued as proof of payment.

Stamp Duty Rates in India

Follow this table to know the stamp duty percentages across different states in India:

How to Calculate Stamp Duty & Registration Charges?

Stamp duty typically ranges between 5% and 7% of the property's market value, while registration charges are usually around 1% of the market value. These fees can add up to several lakhs of rupees. 

These are the several factors that affect the stamp duty rates​:

• Location of the property
• The market value of the property
• The intended usage of the property (residential or commercial)
• Type of property and the number of floors

Here is a simplified example:

Let us consider that a father in Karnataka donates a property worth Rs. 80,00,000 to his son. Assume that the stamp duty applicable by the state on such a transfer is 5% of the property's value.

Calculation of stamp duty:

Stamp duty = 5% of Rs. 80,00,000

                   = (5/100) x 80,00,000

                   = Rs. 4,00,000

Thus, stamp duty would be payable on Rs. 4,00,000. In addition, registration charges would be imposed, typically a lesser fixed amount or percentage.

Stamp duty is very crucial if you are making a real estate transaction. Stamp duty plays a vital role in India's financial and legal systems. It is essential for validating documents and serves as a significant revenue source for the government. Since stamp duty increases the overall transaction cost, it is necessary to consider this expense beforehand, especially if you are responsible for the payment.

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