Purchasing a property that can be a house, flat or just a piece of land is probably one of the biggest decisions you make in your life and it’s not just for you but the millions of families in the country which can be challenging both mentally and financially. The decision we make has huge impacts on us and our future and thus is advised to make them with the best available knowledge beforehand. For most cases, people can pull off such high-value purchases with the help of a lender i.e. a bank through home loans. While there is a limit to the amount which can be borrowed, a person does prepare an estimated amount that might be required through this whole process and then arrange the amount with the loaned money and his/her savings. This is where a lot of people make a small error of judgment that is not taking stamp duty and registration into consideration.
Though there is common knowledge available about these terms one should have brief knowledge as they are an important step for the purchase and act as valid proof for the transfer of ownership. Thus, through this article, the whole process and meaning of stamp duty and registration will be understood especially for those interested in the purchase of a property.
Stamp duty is an amount of tax that is charged by the government of India on the legal paper which depicts that there is an exchange of ownership between two parties. This act was established way back during the British era in the year of 1899 under the stamp act. Think of it as a sales tax that is charged on the purchase of a new property.
The amount of tax may vary on various factors but is usually between 4% to 10% of the amount paid in transaction.?
So, why is this piece of document legal? Simply put this will be the proof that the property owner has been transferred legally and now you are its rightful owner. In case If you are thinking about what would happen if you didn’t file for this one time only stamp duty, then a consequence, the government is liable to fine you with aggressive charges which could be 2% of the amount that you have to pay and can go up to a massive 200% of the original amount that you had to pay. Make sure you pay the amount right and on time which could be before, on the day of sale, or the very next working day.
As discussed above the amount paid in stamp duty varies and depends on other factors but before we understand those factors, we must know the principal amount on which the tax is being charged. The term ready reckoner rate is the minimum market value decided by the government authority and the agreement value the price agreed by both parties. The amount is decided between them whichever is more. The ready reckoner rate is revised every year and is the same throughout the country but it’s the charges that may vary. Thus, the factors on which stamp duty depends are: –
Thus, if I buy a property in Delhi the charges on the stamp duty may vary from the property bought in Maharashtra, and also if you purchase it in the name of your wife. To be updated with the latest norms and policy you can visit the state government website, of the one where the property belongs. In the case of flat ownership, the amount for stamp duty is under UDS i.e. undivided share in which the charges are divided equally among the flat owner on that property.
There are basically three ways through which you can your stamp duty: –
Once you are done with all the formalities of stamp duty, the final step comes with the registration of the property under the registration act of 1908. The law also mandates that the registration should be done within 4 months from the date when the agreement was executed. The registration is done by the sub-registrar from the jurisdiction of where the property belongs. If the registration of the property is not done the ownership may be considered invalid.
The registration fee is a separate charge that is paid after the stamp duty and is paid for the transfer of the rights of ownership to the new owner. The charges are around 1% of the market value or the agreed amount whichever is more but the maximum can be charged up to 30,000 rupees. These charges may also vary from state to state.
To register for the property the person must bring the original agreement and two photocopies of the document to the sub-registrar office. The payment of the registration fee can be done at the office or otherwise, can also be paid online. In the office, both the previous and current owner showed to be present along with appropriate witnesses. You also need to carry your ID proof, two passport size photographs of both the parties the proof of stamp duty and registration payment, you can ask for any other essential document that may be required. After the registration, you will receive a receipt with a specific serial number that is issued in your name. With this, the process of being a legitimate owner of a property is completed.
The above process is one of the most critical aspects of purchasing a new property, and if you are a new owner or aspire to be one then all this above information becomes even more important for you to understand and then take the necessary steps. Even if you still want to be more cautious you can always consult the experts for opinion but we hope that through this you might have got the zest of the concept and a better understanding of the process.