10 September, 2018 Financial & Technical
Everyone cherishes a dream of owning their dream home, but documentation and registration procedure does make that journey a tad difficult. Your ownership is not determined alone by the physical possession of a property.
All the necessary documents and legal papers should be in place to indicate a clear title. The legal ownership of a property involves the homeowner to carry out registration of the documents and to pay stamp duty. Let’s now understand what stamp duty is all about and what role does it pay in buying a home.
What is a stamp duty?
Stamp duty is a type of property tax, that needs to be paid on the monetary transaction that takes place while completing your home purchase. It is similar to the sales tax or income tax collected by the government and includes a tax on transactions such as conveyance deeds, sale deed, and power of attorney papers. Once the stamp duty is paid, these documents become legally valid and then can be produced before the Court of Law and you need to pay stamp duty based on the value of the transaction.
Why is it extremely important to pay the stamp duty?
Only when the stamp duty has been paid on a house sale agreement it is considered as a legal evidence in the court in case of a dispute. When you pay stamp duty it acts as a proof that a property is officially registered in your name and automatically recorded in the property purchase transactions maintained by the government. It should be noted that property registration papers are not counted as legal proof; they are only a fee charged from the home buyer for book-keeping purposes.
Another important aspect of stamp duty which is crucial for home buyers is that stamp duty should be paid before, on the day or the next working day of the execution of the sale agreement. If you delay the payment there is a penalty of 2% every month on the deficit amount of the stamp duty, subject to the maximum rate of 200%.
How does the stamp duty calculate?
Stamp duty is calculated by evaluating the value and nature of your property and is based on the agreement value or market value, whichever is more. Additionally, stamp duty is levied on every agreement and not on every person involved in the transaction and it is payable only on the contents of the registration document, and not the transaction value. Charges of stamp duty vary from state to state and are dependent on a lot of factors like old/new property, urban/rural property, the gender of the owner, agricultural/non-agricultural land, commercial/residential property etc.
It is important to note that to encourage property ownership among women, many states charge lower stamp duty if the property is registered in a woman's name. Also, apartment buyers must pay stamp duty charges based on how the property is shared amongst different owners. For e.g. a project built on 50,000 sq. ft of land and units of similar sizes are sold to 10 people, each one of them must pay a stamp duty charge for 5,000 sq. ft.
Stamp duty is a onetime chargeable amount. You can pay the stamp duty on judicial stamp papers, franking and e-stamping. The most common methods to pay stamp duty is on judicial stamp papers where all the details pertaining to the agreement are either written or printed on the non-judicial stamp physical papers purchased from a licensed vendor, while the digital method of e-stamping is a highly secure method of paying.
We hope that the above information gives you a comprehensive idea about stamp duties and its importance in purchasing your dream home.
