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Saturday, January 9, 2016

Paying Stamp Duty


Paying stamp duty

After extensive homework and efforts, you have zeroed-in on your dream house. And now begins a trail of formalities that you must fulfill - to make this dream house your very own possession. One of these formalities is paying stamp duty. In the context of a property transaction, stamp duty is the tax you need to pay to the State Government whenever a property is transferred from one name to another. By paying the proper stamp duty, you can get your property registered and enjoy a clear title for your property. The stamp duty is generally paid by the buyer.


How much stamp duty to pay?

Stamp duty is a state matter – so it varies from state to state. It also varies depending upon whose name you buy property in. You would need to pay the stamp duty on the transaction value or the circle rate value, whichever is higher. (If you are wondering what is circle rate – here's a simple explanation. Circle rate is the maximum rate at which a property is valued in an area; circle rates are specified by the government),

For residential property, the general structure of stamp duty rates is a flat charge up to a certain value of property - and then additional percentage for the remaining value. The structure is specified by the State Government and it varies for different states.

Let's see an example to understand how stamp duty is calculated using the rate structure.

Given below is the stamp duty rate structure for Mumbai:

Market value of flat in Rs.

Stamp Duty Payable on Agreement

Up to 1,00,000/-



From 1,00,001 to2,50,000



From 2,50,000 to 5,00,000



From 5,00,000 to 7,50,000



From 7,50,000 to 10,00,000



10,00,000 & above



You want to know the stamp duty payable on a transaction worth Rs. 6,50,000. 
For this, first see the slab you fall into based on the rate structure. From the above table, you will see that you fall into the range 'From 5,00,000 to 7,50,000'. 
So, Stamp duty payable = 8,750 + 6% 
Note that this 6% is calculated as (6,50,000 - 5,00,000 ) *6 % = 1,50,000 * 6% = Rs.9,000 
So total stamp duty you need to pay is (8750 + 9000) = Rs.17,750

For quick calculation, use the Stamp Duty Calculator to calculate stamp duty amount you need to pay for your property.

Certain special cases

  • If a transaction has several instruments associated with it, then you need to pay stamp duty on a single instrument. For other instruments, you need to pay a nominal stamp duty of Re 1.
  • If an instrument comes under more than one description given in Schedule 1 to Indian Stamp Act 1899, then highest rate specified among the different heads will prevail.
  • If one instrument covers multiple matters, then you need to pay total amount of stamp duties payable on separate instruments.

When to pay stamp Duty?

You need to pay stamp duty either before the execution or at the time of execution or on the next working day after the execution of the sale agreement or conveyance deed (also referred to as instrument) in the respective state. 

Note that originally Sec. 17 of the Indian Stamp Act 1899 provided that all the instruments executed in the state must be stamped before or at the time of execution. Now it can be stamped on the next working day after the execution of document.

If you have received any Power of Attorney from abroad which is not stamped, you can send it to the Collector of Stamps who should be requested to stamp the same with proper duty on showing proof that the document was received in the state within a period of three months.

How to pay stamp duty?

You need to pay the stamp duty by purchasing stamp papers issued by the Government treasury. These stamp papers need to be in the name of one of the executors of the instrument for property transaction.

You can purchase the stamp papers from the office of Sub-Registrar/District Registrar, situated in the respective area, by making a payment in the form of cash or cheque or Demand Draft (this payment is actually referred to as the 'stamp duty'!). In some states like New Delhi, you can purchase the stamp papers from selected branches of certain designated banks like State Bank of India (SBI).

The Government of India has recently introduced e-stamping – which would gradually replace the stamp papers used in property transactions. This system is being implemented through the Stock Holding Corporation of India (SHCI) and is already operational in some states like Gujarat, Maharashtra, and now also in Delhi. Under this new system, people who want to register properties and have to pay stamp duty of Rs. 500 or more – will need to deposit the stamp duty payment with various branch of designated banks and they will be assigned a number on security-printed receipt. This number will be the validation key for the transaction document that would be on the plain paper.

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