Stamp duty on exchange of property

Shivendra Pratap Singh

Advocate

High Court Lucknow

Article

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The stamp duty on the exchange of property in India varies from state to state. Each state in India has its own stamp duty laws, and the rates can differ significantly.

Stamp duty is a tax levied on the transfer of property and is usually paid by the buyer. It is calculated based on the property’s market value or the consideration amount mentioned in the sale deed, whichever is higher.

To find the specific stamp duty rates applicable in a particular state in India, you need to refer to the official website of the respective state’s Revenue or Stamp Duty Department. Alternatively, you can visit the local Sub-Registrar’s office to inquire about the current stamp duty rates.

Stamp duty

Stamp duty is a type of tax levied on certain legal documents or transactions, such as property sales, agreements, contracts, and various commercial transactions. The tax is applied to the formal recognition of these documents to make them legally valid.

The name “stamp duty” originates from historical times when physical stamps were affixed to the documents to indicate that the duty had been paid. Today, in most cases, the stamp duty is paid through electronic means, and physical stamps are no longer used.

One of the most common instances where stamp duty is applied is in real estate transactions. When you buy or transfer property, a specific percentage of the property’s value is paid as stamp duty to the government. The amount of stamp duty can vary depending on the location, property value, and other factors.

Stamp duty serves as an important source of revenue for the government and helps in the validation and recording of legal transactions. Failing to pay the required stamp duty can lead to legal complications and may render the document invalid in court.

Calculation of stamp duty

The calculation of stamp duty in India is based on various factors, and the rates can vary from state to state. Stamp duty is typically charged on the value of the transaction or the market value of the property, whichever is higher. Here’s a general overview of how stamp duty is calculated for property transactions in India:

  1. Determine the property value: The first step is to determine the value of the property that is being bought, sold, or transferred. This can be either the agreement value (the amount mentioned in the sale agreement) or the market value, as assessed by the government’s property valuation authorities. In most cases, the higher of the two values is taken into account.
  2. Check the stamp duty rates: Each state in India has its own stamp duty rates, which are specified in the state’s Stamp Duty Act. These rates are usually expressed as a percentage of the property value.
  3. Calculate the stamp duty: Once you have the property value and the applicable stamp duty rate, you can calculate the stamp duty amount by multiplying the property value by the stamp duty rate. For example, if the property value is Rs. 50 lakh and the stamp duty rate is 5%, the stamp duty would be Rs. 2,50,000 (50,00,000 * 0.05).

It’s important to note that there may be certain exemptions or concessions on stamp duty for specific categories of buyers, such as first-time homebuyers, women, or senior citizens. Additionally, some states may have different stamp duty rates for urban and rural areas.

To get the precise stamp duty calculation for a specific property transaction, you should refer to the official website of the respective state’s Revenue or Stamp Duty Department or consult with a local property lawyer or a registered property valuer. They can provide you with the most up-to-date information on stamp duty rates and any applicable exemptions or concessions in your state.

Who is bound to pay stamp duty?

In India, the liability to pay stamp duty is generally on the buyer of the property or the person responsible for executing the document. The specific rules and regulations regarding who is bound to pay stamp duty can vary from one state to another, as stamp duty is a state subject and governed by the respective state’s laws.

Here are some common scenarios where stamp duty is typically paid by:

  1. Property transactions: In the case of real estate transactions, such as buying or selling property, the buyer is usually responsible for paying the stamp duty. The stamp duty is paid on the sale deed or conveyance deed executed during the property transfer.
  2. Lease agreements: In the case of lease or rental agreements, the stamp duty is generally paid by the tenant or lessee. The stamp duty is paid on the lease agreement.
  3. Share transfer: When shares of a company are transferred, stamp duty is often paid by the buyer of those shares.
  4. Loan agreements: In loan or mortgage agreements, the stamp duty is usually paid by the borrower or mortgagor.

In which mode stamp duty is being paid in India

Stamp duty in India is primarily paid through physical stamp papers or e-stamping, depending on the state’s rules and regulations. However, please note that the modes of payment and procedures may have evolved since then, so it’s important to verify the current methods with the respective state’s Stamp Duty Department.

  1. Physical Stamp Papers: In the traditional method, stamp duty was paid by purchasing non-judicial stamp papers from authorized stamp vendors or government-approved banks. The required stamp duty amount is calculated based on the transaction value, and the individual or parties involved in the transaction buy the necessary stamp papers. The stamp papers are then affixed to the document or deed, and the transaction is considered legally valid.
  2. E-Stamping: In recent years, many states have introduced electronic stamping or e-stamping as a more convenient and efficient method of paying stamp duty. Under e-stamping, individuals can generate stamp duty certificates electronically by accessing the official website of the respective state’s Stamp Duty Department. The details of the transaction and the stamp duty amount are filled in online, and the payment can be made through various online modes such as net banking, credit/debit cards, or electronic wallets. Once the payment is made, the electronic stamp certificate is generated, which can be printed and attached to the document.

E-stamping offers several advantages, such as reducing the chances of stamp paper forgery and making stamp duty payment more accessible for individuals.

How to obtain e-stamp

Here are the steps on how to obtain an e-stamp in India:

  1. Go to the official website of the Indian government’s e-stamping portal http://www.shcilestamp.com/.
  2. Click on the “Register” button.
  3. Enter your name, email address, mobile number, and password.
  4. Click on the “Create Account” button.
  5. You will receive a verification code on your email address and mobile number.
  6. Enter the verification code and click on the “Verify” button.
  7. You will be redirected to your dashboard.
  8. Click on the “Buy E-Stamp” button.
  9. Select the type of e-stamp you want to buy.
  10. Enter the value of the e-stamp.
  11. Click on the “Buy” button.
  12. You will be redirected to the payment gateway.
  13. Enter your payment details and click on the “Pay” button.
  14. Your e-stamp will be generated and you will receive it on your email address.

Here are some additional things to keep in mind when obtaining an e-stamp in India:

  • You can buy e-stamps from anywhere in India.
  • E-stamps are valid for 3 months from the date of purchase.
  • You can use e-stamps for a variety of legal documents, such as sale deeds, lease agreements, and power of attorney documents.