Stamp Duty and Registration Charges on a Home Loan

If you intend to purchase a house, keep in mind that the price the seller has offered you does not represent the total cost of the transaction. According to Indian tax laws, stamp duty is an extra cost that all homebuyers in our country must cover to become legally responsible for their properties. When purchasing a property, it is essential to have clear, crisp paper since you will need these legal papers for a variety of purposes for a very long time. In other words, stamp duty must be paid as soon as everyone signs the sale agreement. When you register it in your name, the price you were quoted is likely to rise by a few lakhs.

What is Stamp Duty?

The state government charges this cost for the paperwork required to register your property. This tax is imposed on transfers of both freehold and leasehold real estate, including residential and commercial buildings. When you pay stamp tax, the government registers your name. The stamp mark on the paperwork confirms that the paper has obtained official approval and is now genuine, which is why the fee is so named. States have different stamp taxes and registration fees. When registering a property, you are required to pay stamp duty according to Section 3 of the Indian Stamp Act, 1899.

Registration Fees

The ownership paperwork must be registered once stamp duty has been paid. Registration must be completed within four months after the execution date. Registration costs are payable at 1% of the market value or the agreement value, whichever is greater, up to a maximum of Rs. 30,000.

How is Stamp Duty Calculated?

Stamp duty is estimated depending on the property’s worth. In India, however, stamp duty fees are between 3 and 10 percent of the property’s worth. You will end up paying a large fee if the market value of your property is high, and vice versa. The rate of stamp duty depends on a number of factors, including the property’s location, gender, the owner’s age, the property’s use, the kind of property it is, and the amenities of the project. The value of the property is established by authorities using the Stamp Duty Ready Reckoner. Every January 1st, the government releases the market values. One cannot lawfully claim the property without paying the required stamp duty.

Factors Affecting Stamp Duty

State-to-state differences in stamp duty exist. The following variables affect how much duty is charged.

• Location: The stamp duty fees will be more expensive if the property is situated in an urban region compared to a suburban or rural one. You will end up paying less to have your property stamped if it is situated inside the Panchayat borders or on the outskirts of the town.
• Age of the owner: Almost all state governments have reduced the cost of senior citizens’ stamp duties. The age of the property owner has a sizable impact on stamp duty rates in the majority of states.
• Age of the property: Since stamp duty fees are computed as a proportion of the property’s total market value, older structures often have lower fees while newer structures have higher fees.
• Gender of the Owner: When compared to women, men spend around 2% more getting their property registration paperwork stamped. In Delhi, you are still qualified for a stamp duty discount if you agree to register the property jointly with the woman as the principal owner. The availability of this amenity, however, varies across the nation.
• Purpose: Comparatively speaking to residential structures, commercial buildings are subject to higher stamp duty fees. Your stamp duty expenses will differ depending on whether you are purchasing land, an apartment, a standalone home, or a villa.

Does a Home Loan Cover Stamp Duty and Registration Charges?

As we talk about the importance of stamp duty and how to calculate it, you should also budget for the additional costs that will be imposed on your budget as a house buyer, including stamp duty and registration fees. Banks are advised not to include stamp duty, registration, and other documentation fees in the home loan charges of housing properties to prevent the Loan to Value (LTV) Ratio’s effectiveness from being diminished, according to the Reserve Bank of India’s circular on “Housing Loans by Commercial Banks – Loan to Value (LTV) Ratio” dated February 3, 2012. These fees will be paid by the government. Your loan does not cover stamp duty or registration; each must be paid separately by the buyer of the property.

Tax Benefits

Stamp duty and registration fees are exempt from taxation under Income Tax Act Section 80C. Section 80C’s maximum benefit for stamp duty and registration expenses is Rs. 1,50,000. When there are joint owners, each co-owner is allowed to submit their income tax returns based on how much of the property they own.

Payment of Stamp Duty and Registration Charges

Purchasers may use any of the following methods to pay their stamp duty, both online and offline:

• Physical Stamp Paper: In this case, you buy non-judicial stamp paper from a licensed seller.
• E-Stamping: One of the most practical ways to pay for stamp duty is through the SHCIL website.
• Fanking: The majority of banks offer homebuyers franking agent services.

Conclusion

Stamp duty and registration fees are typically not included in the home loan amount that the bank has approved. To take possession of your new home, you must pay these fees in addition. When registering your property, you must pay the correct stamp duty as required by law. Many people give their property a low market value to avoid paying expensive registration and stamp duty fees. Therefore, once your sale agreement is signed, registered, and the registration and stamp duty fees are paid, you are deemed the owner of the home. Explore more informative articles on Piramal Finance.