When a property is transferred from a seller to a buyer, there is a certain fee that is levied by the state government. This fee is known as the stamp duty. Once the buyer pays the stamp duty, they receive a receipt of acknowledgment of the stamp duty payment. This receipt is needed to confirm legal ownership of the property. Only after finally paying off the stamp duty and registration charges and registering the sale agreement will you be considered as the owner of the property.
Do note that stamp duty is also applicable on sale deeds, conveyance deeds, as well as the power of attorney papers, and can vary based on the state you are living in (2-7%). For instance, the stamp duty charged in Tamil Nadu is around 7%, however, in Maharashtra, it is around 5%. This mandatory fee needs to be paid by the buyer.
Importance of stamp duty
No matter what type of property you are buying, such as a newly completed, under-construction, or re-sale property, paying stamp duty is a must. This fee is payable either on the agreement value of the property or on the ready reckoner rate, whichever is higher. The ready reckoner rate is the property’s minimum rate that is fixed by the state government. There are numerous factors that influence the reckoner rate such as the property’s location, amenities, market value, type, and so on. Also, do keep in mind that you would need to pay GST if the property is under construction.
Why do buyers need to calculate stamp duty?
Since the stamp duty fee is charged on top of the property price, even a slight change in the fee can influence the property-buying decision of the buyer. Along with the stamp duty, you also need to pay for registration charges, which in Maharashtra, are set at Rs 30,000 (for properties costing above Rs 30 lakh). This is why buyers need to make sure they are getting a sufficient home loan amount for financial cover.
How to pay stamp duty?
Stamp duty can be done online as well as offline. You can go to an authorized seller to purchase physical stamp papers that include your property agreement details. Another way is to get in touch with an authorized franking agent who can stamp your property documents. This will indicate that the stamp duty payment is done. If you wish to pay the stamp duty online, visit the SHCIL website (Stock Holding Corporation of India). After completing the payment, an e-stamp certificate will be sent to you.
Now, since the stamp duty and registration charges are generally not covered by a home loan, you need to have enough savings to pay these charges. This is why it is so important to make use of a stamp duty calculator, as this will help in evaluating the stamp duty you would have to pay while buying a property.