Everything You Need to Know About Stamp Duty

Everything You Need to Know About Stamp Duty

There are several expenses associated with buying a home above and over the cost of the housing itself. For instance, the respective state governments levy a stamp duty to officiate the papers documenting the rightful transfer of the aforementioned property.

The following sections will cover everything to know about stamp duty in India.

What Is Stamp Duty?

Homeowners need to pay a certain amount as legal tax to the respective state government when buying properties to get their associated records stamped. This stamping procedure makes one’s property documents admissible as evidence in court, giving him or her legal ownership of the home in question.

This aforementioned tax is the property’s stamp duty. State governments in India can collect this tax as per Section 3, Indian Stamp Act (1899). As a potential buyer is legally obligated to pay this amount within the stipulated period, official bodies can charge a penalty in case of delay in payment. 

As there is no fixed amount decided for stamp duty in India, the cost can vary depending on the policies of each state government. However, the tax rate generally ranges from around 5% to 7% of a property’s appraised market value. The buyer will also have to pay a property registration charge – costing around 1% of a property’s market value – alongside stamp duty.

Notably, when an applicant avails a home loan from a financial institution, stamp duty charges are not covered by the credit amount sanctioned by a lender. Moreover, provisions under Section 80C, Income Tax Act, 1961 permit a homebuyer to claim tax deductions on both stamp duty and registration fees under a Rs.1.5 lakh limit.  

Which Factors Affect Stamp Duty Charges?

A number of factors determine the amount homebuyers will need to pay as stamp duty. These include: 

  • Age and gender of homebuyers

Generally, most state governments provide a discounted rate of stamp duty for senior citizens and women buying a home. For instance, in New Delhi, a male homebuyer will pay a 6% home duty, compared to the 4% levied on a female homebuyer.

  • Age and type of property

As the present market value of the property determines the percentage of the stamp duty charged, an older property will attract comparatively lower expenses. Similarly, a commercial building will cost more as it has comparatively more amenities. A homebuyer will be paying a higher stamp charge for it than for a residential building.

  • Location of a property

Suppose an individual is purchasing a building under the perimeters of a municipal or suburban area. In that case, he or she can expect to be charged with a higher rate of stamp duty. On the other hand, a property located on the city outskirts will require a lower expenditure.

When purchasing a property, one needs to be aware of the various pre-approved offers that many financial institutions provide. These offers let applicants check their eligibility for a home loan and reduce the application time. One can check his/her pre-approved offer by providing some basic details.

Why Use a Stamp Duty Calculator?

Some leading financial institutions offering home loans provide a stamp duty calculator on their websites. Anyone can use such a calculator to determine the amount he or she will need to spend on this tax. This pre-planning can help a borrower maintain financial discipline and make the necessary savings before purchasing a house.

To use this calculator, a user has to follow these simple steps:

Step 1: Open the official website of a lender.

Step 2: Navigate to the stamp duty calculator.

Step 3: Select the state where the property is located in.

Step 4: Customise the property’s value as per appraisal.

This calculator will display the rate of stamp duty levied in the respective state and the total amount to pay.

Therefore, knowing what stamp duty is and how to calculate the expenses for the same makes it easy for a borrower to achieve his or her long-term financial objectives. With an adequate blueprint of the necessary outlay, a borrower can opt for a home loan without financially overburdening him/herself. 

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