Stamp Duty and Registration of Property

Transfer of ownership is a complicated process as it is essential for property buyers to be aware of the charges of the form of stamp duty and registration. These charges are collected by the concerned state governments and therefore varies from one state to another. Most states have different stamp duty charges for urban and rural areas, and a few of them offer discounts to women buyers. In this article, let us look at the concept of stamp duty and registration of the property.

Stamp Duty

Stamp duty is similar to other taxes charged by the Government. The fees collected here are used for transactions that prompt for legal documents such as sale deed, conveyance deed and sale agreement. In other words, stamp duty is a tax that is paid for any documents through which any right or liability is intended to be created, extinguished, transferred, extended or recorded.

Calculation of Stamp Duty

Stamp duty is calculated based on the market value or the agreement value of the property (whichever is higher). It can be paid only on the contents of the registration document and not on the transaction value. Moreover, it is charged on every agreement and not on every individual who is a part of the transaction. To calculate the market value, stamp duty authorities approach a Stamp Duty Ready Reckoner, which is issued on the 1st of January every year. The charges for this purpose are determined by the respective state governments. The following factors could play a role in determining the cost of the property:

The age of the property
Gender of the property owner
Agricultural or non-agricultural classification
Freehold or leasehold classification
Residential or commercial units classification
Multi-storied apartments or independent houses classification
Rural or urban property classification

Stamp Duty Payment

A property buyer has to pay stamp duty before or at the time of executing the deed for which the stamp duty has to be paid. Therefore, it is either paid before the day in which it is executed or on the day when the buyer executes the deed.

Payment Modes of Stamp Duty

Payment of stamp duty can be pursued through any of the following modes:

Physical stamp paper
Franking
E-stamping

Not all payment modes are applicable in every state.

Physical Stamp Paper

Paying through physical stamp paper is the most conventional way of paying stamp duty. In this case, the property buyer has to buy the non-judicial stamp paper from an authorised vendor (these stamp papers are papers that have impressed stamps). Once the stamp paper is purchased, the transaction details can be written or typed on them. In contrast to this, it is difficult to approach a stamp paper vendor, and the cost of stamp duty will be high if a buyer requires many stamp papers. Therefore, this traditional form of payment is not preferred by many property buyers.

E-Stamping

In order to avoid forging of stamp papers and to simplify the stamping process, the Indian Government has introduced e-stamping, which simply is an online mode of stamping. Stock Holding Corporation of India Limited (SHCIL) is authorised as the official vendor for e-stamping. It is also considered as the Central Record Keeping Agency for all e-stamp papers used in India.

Benefits of E-Stamping

The following are the benefits of e-stamping:

It is a convenient and simplified process.
The e-stamp can be verified using the UID number.

Procedure for E-Stamping

The following steps are involved in E-Stamping: Step 1: Log in to the website The property buyer has to log in to the official SHCIL website. Step 2: Transaction Information The user gets the transaction information that is required for e-stamping and the list of collection centres that issues certificates to those who e-stamp. Step 3: Fill the Application The user has to fill the application and submit it to the collection centre. Step 4: Payment of E-Stamping The user has to submit the application by making the appropriate payment using Debit Cards, Credit Cards, cheque, demand drafts and online banking. Step 5: E-Stamp Certificate Once the stamp duty payment is made, the user gets the e-stamp certificate. Step 6: Unique Certificate Number The e-stamp certificate has a Unique Certificate Number (UIN) that mentions the issue date. Once the e-stamp is issued, a duplicate of the e-stamp will not be granted.

Franking

Franking is a process where the authorised franking agent stamps the document denoting that the stamp paper has been paid. Before the execution of the transaction for which the stamp duty has to be paid, the buyer has to approach an authorised bank who acts as a franking agent, or a franking agent has to deposit the stamp duty. Once the stamp duty is paid, a franking machine will be used to frank the document with a unique adhesive stamp.

Franking Rates

Every state has a minimum amount for the franking procedure. For example, in Bangalore, the minimum franking charges are 0.1% of the agreement value. Therefore, if an individual purchases a house for Fifty lakhs, he/she has to pay 0.1% or Rs. 5,000 as franking charges. The franking fee will be adjusted against the stamp duty while executing the sale deed. If the stamp duty of the sale deed is 5.5%, then the individual has to pay only 5.4% as a franking charge of 0.1% is already paid.

Registration of Documents

Once the stamp duty is paid, the documents have to be registered under the Indian Registration Act with a sub-registrar. The Registrar undertaking such an assignment has to be of the jurisdiction where the property is located. It may be noted that the transfer of ownership isn't legal without the registration of documents.

Registration Fee

The registration would be over and above the stamp duty. This fee differs from one state to another.

Documents Required for Registration

The following documents are required for registration:

Identity proof, passport, driving license and PAN card - for both the buyer and the seller.
The original sale deed with two photocopies (such documents has to be printed or written only on one side and has to be submitted at the Office of the Registrar).
Proof of payment of registration fee.
Proof of stamp duty paid.
Proof of payment made to the seller.
Tax certificate (for a second-hand property)
Khata certificate.