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Stamp Duty & Registration

Let us understand how the whole process of stamp duty and registration of property works.

I Stamp Duty

What is Stamp Duty?

Stamp Duty is a tax levied by the government similar to Income Tax. It is important for home buyers to know, that while transferring ownership of property, they need to pay taxes in the form of Stamp Duty and Registration charges to their respective state government. The rates differ from state to state.

Stamp Duty is required to be paid for any Document or Instrument by which any right or liability is, or intends to be, created, transferred, limited, extended, extinguished or recorded. The stamp duty pertaining to immovable properties is to be paid on documents such as Conveyance Deed, Sale Deed, Gift Deed, Partition Deed, Power of Attorney,etc.

Why do you need to pay stamp duty?

The payment of proper Stamp duty on property documents confers legality on them. This means that they can be admitted as evidence in a Court of law. The instruments that are not properly stamped are not admissible as evidence.

Who should pay Stamp Duty?

In the absence of any agreement to the contrary, the purchaser (in case of first sale from a developer)/transferee (in case of a resale)/lessee( in case of lease of property) has to pay stamp duty. In case of exchange of properties, both parties have to bear stamp duty equally.

When should Stamp Duty be paid?

Stamp Duty must be paid in full and on time. In the state of Maharashtra, Stamp Duty is payable:

  • before execution of the document or
  • on the day of execution of document or
  • on the next working day of executing such a document.

Execution of the document means the person’s party signing on the instrument.

Any instrument executed outside the state, is liable to duty only on receipt of such instrument in the state, provided it relates to a property situated in the state or matter or thing to be done in the state. Stamp duty is not levied on a transaction, but on an instrument.

How is Stamp Duty calculated?

The rate of stamp duty varies from state to state. It alsovaries depending on the gender of the person in whose name the property is registered.

Stamp duty is charged on the Marketvalue or the Agreement/ Registration value, whichever is higher.

Stamp duty should be charged on the basis of the contents of the instrument only. If any information that is important for the calculation of stamp duty is missing in the instrument, the valuation officer can call for it. Information such as the area of the flat, number of the floors and year of construction must be mentioned in the agreement for quicker response.

What is market value?

Market value in relation to any property is the subject matter of an instrument related to the property. It is the price which such property would have fetched if sold in the open market on the date of execution of such instrument or the consideration mentioned in the instrument, whichever is higher. The price which such property would have fetched, if sold in the open market, is determined on the basis of the Ready Reckoner issued each year.

How can one pay Stamp Duty?

There are 3 ways to pay Stamp Duty. However, not all states have all three options available. If all methods are available, all are recognized legally and the choice lies with the individuals concerned.

  1. Using papers bearing impressed stamps (non-judicial stamp paper)
  2. Purchase of non-judicial stamp paper from a licensed vendor was the conventional method of stamp duty payment. Either the details of the transaction is written on the paper or a blank stamp paper is affixed to the agreement documents and signed by the parties, indicating that the stamp paper is an integral part of the documentation. Physical stamp papers can get cumbersome. It may be difficult to get the exact stamp paper if the value is extremely low or very high. One also faces the risk of purchasing counterfeit papers.

  3. Using a franking machine
  4. In this method, the concerned party submits the agreement details printed on a blank paper with an authorized bank or a franking agency. Once the requisite stamp duty is paid at their counter, the authorized officer can ‘Frank’ the document, i.e. place a special adhesive Stamp, equivalent to the value of stamp duty on the document with the help of a Franking Machine. Post franking, the document is executed. The advantage is that the transaction takes place fast, if the payment is made via cash or Demand Draft. The disadvantage is that not all bank branches have Franking Machines.

  5. Using the e-stamping facility
  6. E-Stamping is a computer based application and a secured way of paying Non-Judicial stamp duty to the Government. Stock Holding Corporation of India Limited (SHCIL), a public ltd. company, is the official vendor of e-stamps and the only Central Record Keeping Agency (CRA) for all e-stamps used in the country. Payment of Stamp duty for e-Stamping can be made Online ( through NEFT/RTGS or depositing Cash/DD/ Cheque at SHCIL branch office. Once you pay the required amount of stamp duty, you will get the e-stamp certificate with a unique certificate number (UIN), stamp duty type, issue date and 6 character alphanumeric string mentioned on it. The benefit of e-stamping is that, it is convenient and its authenticity can be verified online using its UID number. SHCIL has also designated authorized collection centres, or ACCs-scheduled banks-that will issue certificates to users.

    Electronic-stamping is not available in Maharashtra, as the license for SHCIL was not renewed by the state. But one can use electronic secured bank treasury receipt (eSBTR)- an online payment service.

    You can log onto the website of the authorised bank, currently IDBI Bank, click the link for payment of stamp duty/registration fees. Enter the details and pay the duty through your Internet banking account.

    You can get the eSBTR on giving a printout of proof of payment online at nominated branches of the bank. The eSBTR is a receipt of duty paid to the government. It is printed on secure stationery issued by banks.

Is there a time frame within which the stamp paper must be used?
Yes. Stamp paper should be used within 6 months from the date of purchase. Any stamp used after six months is deemed as invalid.
Is there a penalty for not paying the requisite stamp duty?
In case of delay or improper payment of Stamp Duty, a penalty of 2% subject to a maximum of 200% on the deficit portion of duty, is liable to be paid. Instruments are liable to be impounded till proper stamp duty is paid.
Can one get a refund of stamp duty already paid on an instrument?
Yes. If stamp duty is paid on an instrument, but the instrument is not signed by any party, then one can apply for refund of stamp duty to the concerned authorities within 6 months of the date of purchase of the stamp paper. The original stamp paper needs to be returned along with the application. On receipt of such application, the concerned authorities are empowered to refund the value of stamp duty after deducting such amounts as may be prescribed.

II Registration

What is registration and what is the procedure to register property documents?

After you pay the stamp duty, it is dated, signed by the parties and attested (where required) by witnesses, and then lodged for registration under The Registration Act, 1908 after payment of the registration fee. The registration is carried out by the Sub- Registrar of Assurances of the jurisdiction, where the property is purchased.

All parties signing the instrument are required to be present at the office of the concerned Sub- Registrar of Assurances, either by themselves or through their constituted attorney under a power of attorney to admit execution of the instrument. A passport size photograph, original power of attorney, personal identification such as passport or income tax, PAN Card, adequate photocopies of the original instrument are some of the essentials required for registration. After lodging an instrument, it is registered, and a seal of the Sub-Registrar is affixed on the instrument, thereafter the original instrument is returned to the parties.

The basic purpose of registration is to record execution of document i.e. the record of the ownership of the property, in case of Sale Deed/any Title Deed execution. As long as the title deeds in your name are not registered or recorded, you are not officially the legal owner of the property.

Which documents are required to be compulsorily registered?

Documents listed under Section 17 of the Indian Registration Act, 1908 have to be compulsorily registered. An agreement for leave and license is required to be compulsorily registered under the Maharashtra Rent Control Act, 1999.

Registration of documents listed under Section 18 of the Indian Registration Act, 1908 is optional.

Is there a time limit within which documents should be registered?

Yes. Documents must be registered within four months of the date of execution. After that, the documents can be registered within the next four months on payment of the penalty.

Can a person grant a power of attorney for signing and registering instruments?

Yes. Persons residing abroad or those who travel frequently are advised to grant Power of Attorney to facilitate better management of their property. The Power of Attorney to register instruments must be registered before the Sub- Registrar of Assurances.

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