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07 Jun 2022

What is stamp duty on property?

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Stamp duty on property is a tax levied by the government on property transactions. To be able to show proof of possession, you need legal evidence of ownership of the property. For this, you need to pay stamp duty and registration charges. As per the rules laid out in the constitution, stamp duty is levied and collected by the state government. Therefore it is the state government that decides what the stamp duty should be. This is why it differs from state to state. Stamp duty is also dependent on the value of the property which in turn depends on other factors. These are;

  • the type of property, either residential or commercial
  • the age of property
  • property location 

As stamp duty significantly increases the overall cost, it is important to do due diligence. Ensure that you consider it as a factor in your financial planning architecture while buying a house.  Stamp duty and registration charges are additional costs that a homebuyer must bear when purchasing a property. 

Stamp duty is a direct tax levied by the government. It is payable under Section 3 of the Indian Stamp Act of 1899, on all documented financial transactions. These include bills of exchange, letters of credit, promissory notes, letters of credit as well as property transactions. A document on which stamp duty has been paid is legally permissible and can be presented as evidence in a court of law. Without paying stamp duty, a person cannot attain the status of a legal owner. In India, stamp duty rates vary from between 4% and 9% of the property’s market value. This rate differs from state to state. 

When must one pay stamp duty?

Stamp duty on property is payable before a transaction is executed. However you can also pay the stamp duty due on the next working day from the date of execution of transaction. Delays beyond this in the payment of stamp duty will attract a penalty of 2% per month, which can go upto 200% of the remaining amount. It is recommended to pay the stamp duty in full and in time to avoid paying a penalty.