Last Modified: 05 Oct 2018  |  Home Buying Guide

When you buy a home, the final cost you end up paying isn’t just the total value of the property. It also includes a number of additional taxes and fees, which you should take into account while setting a budget for your house hunt. One of the most important taxes you need to pay on a real estate investment is the stamp duty. Paying stamp duty is crucial as it cements your title as the legal owner of a home. Here is everything you need to know about how to pay stamp duty on your property.

What is stamp duty?

Stamp duty is the amount payable at the time of registering your property. Simply taking possession of your new home doesn’t make you its legal owner. The final and most important step of the entire home buying process is registering your property in your name. Only once you do this can you claim ownership of a property. Before your documents are verified and you are handed the official title, you will have to pay the stamp duty. Stamp duty is charged on transfer of both residential and commercial property as well as on property leases.

How is stamp duty calculated?

Stamp duty isn’t a fixed cost. There are two ways stamp duty is calculated:

● On the total value of the property
● On the circle rate

If it is calculated based on the value of the property, then the property value at the time of registering it is considered. Because of this, it is always advisable to register your property and pay stamp duty as soon as you get possession of it. If you delay it, the property value might appreciate and you will have to pay a much higher cost as stamp duty. As stamp duty is a state tax, the exact amount also varies among different states. Generally, stamp duty ranges from 3-10% of the total property value.

The second way stamp duty is calculated is by fixing the percentage to the circle rate of the area. The circle rate is a value determined by the local authorities and is the minimum value that the property can be sold at.

The stamp duty levied will depend on which of these two numbers is higher. If the property value is higher than the circle rate, then stamp duty will be calculated against that.

Stamp duty charges in major states

The exact amount payable as stamp duty will depend upon the state you are buying property in. Here are the approximate stamp duty charges for some of the states in India:

Karnataka: 10% of property value
Tamil Nadu: 8% of property value
Maharashtra: 10% of property value
West Bengal: 6% of property value
Delhi: 3% of property value in addition to 5% surcharge

Factors that impact stamp duty value

Apart from these two broad calculations, the amount you pay as stamp duty can also be influenced by the following factors:

Age of the property: Is it old or newly constructed?
Location: Is the property located in an urban, rural, suburban or metropolitan area?
Age of owner: Senior citizens might be eligible for concessions, depending on the state you reside
Gender of owner: Women are given special subsidies on stamp duty in certain states to encourage more women to become property owners
Property purpose: Is it residential or commercial?
Property type: Is it an apartment, independent villa, floor space in a commercial building, etc?

How to pay stamp duty?

The government has taken several initiatives to make the payment of stamp duty easier. There are three main methods you can choose from at the time of registering your property:

  1. Non-judicial stamp paper:

The agreement is printed on a non-judicial stamp paper and is signed by concerned parties. It has to be presented at the sub-registrar’s office within four months or it will lose its validity.

  1. Online payment:

This method is only available in a few states right now; however, it is one of the most convenient ways to pay stamp duty. You can pay the amount on your official state government website through an online transfer. The receipt and forms can then be downloaded and presented at the registrar’s office.

  1. Franking:

The agreement for the payment of stamp duty can be printed on a blank paper. This paper can then be submitted to a bank authorised to process it.

Once you have paid stamp duty and successfully registered your property, you can finally call yourself the owner of your new home! But before you can get to this final step, you need to ensure that you are buying a home with a reliable builder. If you are gearing up for a house hunt, visit Shriram Properties and find out what makes us the most awarded builder!

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