Stamp Duty in Housing Societies

Homebuyers prefer the affordable and convenient option of buying ownership in co-operative housing societies, yet they have to consider the expense of stamp duty which is a prominent feature of real estate transactions. In this article, we will give you a general overview of what is meant by stamp duty and what factors to consider when determining the actual payment.

What is stamp duty?

Stamp duty is a form of tax that is levied by the government on the transfer of property which is legally documented. The stamp duty is to be paid by the homebuyer. According to Wikipedia, “Indian laws require stamp duty payments on…documents affecting rights and title to property…. For example, Maharashtra state’s stamp duty law is governed by The Maharashtra Stamp Act, 1958 (Bombay Act LX of 1958).” Your document of ownership ultimately validates your real estate transaction. As a homebuyer, you have to pay ‘one-time stamp duty’ to seal the deal. Stamp duty varies from state to state but each state has stamp duty acts that homebuyers are required to abide by. For example, Indian Stamp Duty Act, 1899 applies in Delhi after the sale is complete. Stamp duty applies on residential and commercial properties.

How much stamp duty is charged to homebuyers?

Presently, stamp duty is charged from 3% to 10% in different regions of the country. In Maharashtra, up until 2014, the Registration fee was Rs 25000 but after 2015, it has increased to Rs 30,000. Stamp duty is 5% in the state along with a surcharge of 1% for homebuyers in Mumbai. However, in the case of co-operative housing societies, the share transfer premium is decided by the managing committee of the society and does not exceed Rs 25,000 in most cases.

In Delhi, 4% stamp duty is charged for a woman homebuyer and 6% if the buyer is a male.

In urban areas in Karnataka, the stamp duty is 5.6% of the value of the apartment.

In Ahmedabad, the stamp duty is at 4.6%.

In Pune, it ranges from 3% to 5%, while in Kolkata, it is between 5% to 7%.

If you fail to pay the stamp duty, you are penalised from 8% to 20% of the actual stamp duty and may have to face imprisonment in certain cases. However, the penalty cannot exceed 200% of the actual stamp duty due amount.

How is the stamp duty calculated?

To understand how stamp duty is calculated, we’d have to be aware of the several factors associated with the calculation into account. These include the ready reckoner rate which is the standard value of your property assessed by the state government in which the property is built, or the circle rate which is the minimum value at which the transfer or exchange can occur. If the ready reckoner rate is lower and the agreement rate between buyer and seller is higher, the higher value is considered for charging the stamp duty intended use of the property (i.e residential, commercial, storage, manufacturing, etc.) Other factors taken into account are the area/locality in which the property is located, the age and gender of the owner and the type of property, e.g. flat, bungalow, estate, etc. The good news is that many online stamp duty calculators are easily available that give you a good estimate of how much stamp duty, you are to pay for the value of the property. For example, if you were to buy a property estimated at Rs 40,00,000 in Maharashtra, you will be charged Rs 1,55,200 as stamp duty in general. Of course, the rate may vary if the property was in Mumbai. These are estimates and the actual stamp duty may vary depending on the factors mentioned above. Savvy homebuyers shortlist several properties and compare overall rates keeping in mind the variations in stamp duties. Stamp duty can be paid through physical stamp paper, via a franking method in which an agent is required, or by the way of e-stamping.

In case of cooperative housing societies where transfer of shares is involved, the stamp duty is paid after determining the actual market value of the property (usually charged between the range of 3 to 5% depending on the location of the immovable property whether within the municipal corporation, cantonment, Nagar panchayat, Gram panchayat, etc). It is not decided upon the rates in the ready reckoner or the demand of the seller who is transferring the shares. So if the homebuyer is not willing to pay extra stamp duty, the sub-registrar gets involved and sends forward the request to the collector to determine the actual market value of the property.

If the property is inherited, the stamp duty is only Rs 200.

Exemption on stamp duty

According to co-operative societies act 2008, a society is exempt from stamp duty, taxes and fees on instruments executed by or on behalf of the society and relating to the business of the society.

Recently, the Bombay High Court has ruled that stamp duty cannot be charged for past transactions, which means that only up to 10% of penalty will be payable on deficient stamp duty (instead of the usual amount which went up to 400%) on transactions of sale/tenancy made on or before December 2018.

Stamp duty can be claimed as a tax deduction up to a limit of Rs 1,50,000. Home loans do not include stamp duty and registration charges and have to be paid out of pocket by the homebuyer.

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