Stamp Duty for your Home

Stamp duty is a tax paid to the State Government. It is payable on instruments such as an affidavit, an agreement, an indemnity bond, etc. and not on transactions.

Why it is imperative to pay stamp duty

Payment of proper Stamp Duty on instruments bestows legality on them and such instruments are eligible to be given as evidence in Courts.

The purchaser bears the cost of the stamps

In the absence of an agreement to the contrary, the expense for purchasing stamps is borne by the purchaser. The stamps are to be purchased in the name of one of executors to the Instrument.

Rates of stamp duty

The Stamp Duty is payable on the agreement value of the property or the market value which ever is higher. Stamp duty rates on instruments relating to transfer of immovable property vary from place to place. The rates are specified in the Bombay Stamp Act, 1958. In some cases, a concession is given on the stamp duty payable.

Difference between Stamp duty and Registration charges

Stamp duty is a tax levied by the State Government and stamp duty rates vary from State to State. Stamp Duty Department is constituted for collecting the revenue due to the Government.

Registration charges are collected for keeping the records of the documents. The Indian Registration Act, 1908 is a Central Act which is a common for all the States of India.

How the market value of the property is determined

The market value of an immovable property is the value at which the seller is willing to sell and the buyer is willing to buy.

How the Stamp authorities determine the market value of a property

The Stamp Authorities have fixed values of properties for different localities based on the information accumulated by them.

The Sub-Registrar of the area in whose jurisdiction the property is located is contacted for determining the market value of the property.

Non-acceptance by parties of market value arrived at by Stamp Authorities

It is not binding on the parties executing the documents to accept the market value indicated by the Sub-Registrar.

The parties can ask the Sub-Registrar to refer their case to the Collector of the District for determination of true market value and it is binding on the Sub-Registrar to do so when asked by the parties.

Adding value to the flat for more number of floors

The stamp authorities increase the value of the flat based on the number of floors the building has. Higher the number of floors, larger is the increment in the value. The area of balcony has to be included while calculating the area of flat.

Area on which stamp duty rates are fixed

Stamp duty rates are fixed on built-up area basis. 20 % is added to carpet area to arrive at the built up area and 20% is added to the built-up area to arrive at the super built-up area.

Linking registration fees with stamp duty

When parties register their document the Sub-Registrar charges a fixed fee based as a percentage of the consideration value subject to a maximum limit. The Sub-Registrar will issue a notice telling the parties to pay the difference in Stamp duty if the duty has not been paid as per the valuation booklet prepared by the Deputy Director of Town Planning and valuation.

The prescribed area rates are available with the Sub-Registrar's Office and if an attempt is made parties are shown the rates. However I would like to state that each property has its own merits and demerits depending upon its situation, surroundings etc. Thus the rates cannot be generalised.

Differences in value of buildings in the same locality [a better and newer building as compared to a dilapidated structure]

It is possible that a more up market or prestigious building is a particular locality may fetch a higher rate than a neighboring building. In this case, if there is a dispute in the market rates, the matter should be referred to the town-planning department.

Valuation in case of transfer of residential flats by landlords to tenants based on a certain number of months' rent.

In the case of properties which are transferred subject to tenancy the objections should be made to the stamp authorities so that the same may be considered. It is a general view that properties, where there are genuine tenancy litigation normally fetch less than the market value. The Stamp Authorities will value the property at 108 months rent plus construction cost or the agreement value whichever is higher. The authorities also insist for electricity bill, rent receipts, etc to prove the tenancy or the agreement value which ever is higher.

Whether valuation done for wealth tax purposes is considered for stamp duty

For payment of wealth tax, the valuation is linked with Municipal Property Tax and there are licensed valuers whose valuation report is acceptable to the department. The stamp duty authorities don't consider this valuation and stamp duty is levied on the fair market value of the property as decided by the Stamp Authorities.

Whether stamp duty will have to be paid if there is a deed of family settlement and a flat is transferred amongst family members

Yes, As per the provisions of Bombay Stamp Act, Stamp Duty will have to be paid on a deed of Family Settlement.

Whether stamp duty will have to be paid if the flat is gifted by a donor

Yes, Stamp Duty will have to be paid if the flat is gifted by a donor.

Q.4 Is the decree of final order of a civil court by which immovable property is transferred be liable to be stamped as a Conveyance?

Ans. Yes, After the amendment of article 25 of the Bombay Stamp Act, the definition of conveyance has been widened, in view of the amendment decree or final order of the court by which immovable property is transferred is liable to be stamped as a Conveyance.

Consequences of under valuation of document

If the collector has reason to believe that lower stamp duty has been paid, he can take coercive measures after giving reasonably opportunity to the opposite party of been heard. He can charge a penalty for the period of default.

Instrument executed on stamps not bearing the name of one of the executors
Such instruments are treated as improperly stamped and cannot be used as evidence for any purpose. Also, these instruments are sent to the Collector of Stamps for recovery of proper stamp duty.

Timing and mode of payment of stamp duty

The Stamp Duty is payable on instruments before or at the time of execution or on the next working day following the day of execution. The stamp duty can be paid by account payee cheque, demand draft or pay order. If it is paid by cheque the documents are delivered after the encashment of the cheque. In case the stamp duty has been paid by pay order, demand draft than the documents are returned within a short period of time.

Whether stamp duty can be paid in installments since cost of the flat is also being paid in installments

Stamp Duty cannot be paid in installments.

Whether one has to pay stamp duty in case of death of a member of a Co-operative Housing Society and the flat being transferred to the legal heir of the member

Stamp Duty has not to be paid when there is transmission of shares. Therefore when the flat is transmitted in the name of the legal heir the question of payment of stamp duty will not arise.

Meaning of adjudication of instruments

Adjudication means determining the chargeability of stamp duty on instruments. The Authority to be approached is the Collector of Stamps appointed in each District. Application for adjudication should be accompanied by a true copy or an abstract of the instrument and also with such affidavit or other evidence as may be necessary to prove that all facts affecting the charge ability of the instrument have been truly set forth in the instrument along with a payment of the adjudication fee. Adjudication can be done both for signed as well as unsigned documents.

Whether chargeability of stamp duty by the Collector of stamps in adjudication is final

The chargeability of stamp duty on the instrument as determined by the Collector of Stamps is not final. The person affected by the order of the Collector of Stamps can go in appeal to the Chief Controlling Revenue Authority. Though there is no time limit prescribed for the filing of an appeal, it will be desirable to file the appeal at the earliest to avoid complications.

Process of adjudication of stamp duty

The parties are required to file the original instrument (signed or unsigned) with the stamp duty officials and pay a prescribed adjudication fee. The duty is levied in the agreement value or the market value whichever is higher. The application has to be submitted to the authorities along with the original instrument and two xerox copies.
Information in Form II of the Bombay Stamp [determination of true market value of the property] Rules 1981 in the form of affidavit on a stamp paper Of Rs.20/- duly notarized.

Meaning of impounding (confiscation) of instruments

A person authorized to receive stamped documents, has the right to confiscate the instrument if he feels that insufficient stamp duty has been paid on the instrument. This confiscated document is required to be forwarded to the Collector of Stamps for recovery of deficit stamp duty in addition to penalty for deficit payment.