Most people buy a property at a certain stage of their lives. Apart from all hassles of searching for a property, applying for a Home Loan etc., there are other few things (like Stamp Duty and Registration charges) that are unclear to most of the buyers. It is important for the readers to know that while transferring ownership of property, a buyer needs to pay taxes in the form of Stamp Duty and Registration charges to their respective state government. These charges, however, vary from state to state. Some states collect different stamp duty from their rural and urban areas, whereas few other states provide discounts to female buyers of the property. Let us understand how the whole process of stamp duty and registration of property works.
Stamp Duty is a tax levied for the transaction performed by way of a document like Sale Deed, Conveyance Deed etc. Technically, a Stamp Duty is 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 relating to immovable properties has to be paid on documents like Conveyance Deed, Sale Deed, Gift Deed, Partition Deed, Power of attorney etc.
The payment of proper Stamp duty on the above mentioned documents confers legality on them. Such instruments get evidentiary value and can be admitted as an evidence in Court of law. The instruments that are not properly stamped are not admitted as evidence. Without the payment of this stamp duty, your solicitor will not be able to officially register your new house in your name, even when the house is transferred within the family.
How a Stamp Duty is calculated?
In India, different states have their own criteria for calculating Stamp Duty. And most of the times, it depends on the document type that needs to be stamped. For example: In Maharashtra, documents are divided into three broad categories for the purpose of Stamp Duty Calculation:
Category (i) Documents wherein the Stamp Duty is “Fixed”
For Ex: Adoption deed, Affidavit, Divorce, Cancellation deed, Entry of Memorandum of Marriage, Indemnity Bond, Letter of license, Notarial Act, Power of attorney, etc.
Category (ii) Wherein Stamp Duty “Varies and depends upon the value mentioned in the document”
For Ex: Agreement relating to deposit of title deeds, pawn, pledge or hypothecation, Clearance List, Lease , Article of association, Mortgage deed, Security Bond, etc.
Category (iii) Wherein Stamp duty “varies and depends on the consideration mentioned in the document or True Market Value, whichever is higher”.
For Ex: Conveyance, Agreement for sale, Gift, Exchange, Partnership Deed, Partition, Development Agreement, Transfer, Trust, etc.
Note: The True Market Value is determined as per the provision of the state defined act prevailing in that particular state.
Appropriate time for paying the Stamp Duty:
Generally all the instruments should be stamped before or at the time of execution i.e. stamp duty is to be paid either before execution of the document or on the day of execution of the document.
Methods for paying Stamp Duty:
1. Purchase of Physical Stamp Paper
3. Purchasing E Stamp (through online payment – SCHIL-www.shcilestamp.com)
Details on the way stamp duty should be paid:
1. Purchasing Non-Judicial physical Stamp papers:
This is a conventional method of paying stamp duty wherein you purchase non-judicial stamp papers from any authorized vendor in your area. Once you purchase the stamp paper in the name of one or more of the parties involved in the transaction, after that you can write/ type the details of your agreement/ transaction on that paper. Earlier, stamp papers were easily available but after the “Telgi scam”, it has become slightly difficult to get a stamp paper especially for bigger denominations. However, there are other two convenient methods of paying stamp duty i.e. E-stamping and Franking.
2. E Stamping:
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 (www.shcilestamp.com ) through NEFT/RTGS or depositing Cash/DD/ Cheque at SHCIL branch office. Once you pay 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. However, the drawback is duplicate copy of e-Stamp is not issued.
It is a process wherein an authorized Bank/ franking agency puts a stamp on your document indicating that the stamp duty has been paid. Before executing the transaction (of buying a property) i.e. before signing on the document, one can approach an authorized Bank/ franking agency and deposit the required stamp duty at their counter. Once the stamp duty is paid, the authorized officer can Frank with special adhesive Stamp by Franking Machine that is intended for stamping such documents.
All the states in India have their own norms for the minimum amount for Franking. For Ex: Franking charges in Bangalore are minimum 0.1% of the agreement value i.e. If you are buying a house, and at the time of registering “Agreement of Sale”, you need to pay minimum 0.1% of the actual sale consideration of the property. If you are buying a property for Rs. 50 lacs, then at the time of “Agreement to Sale”, you need to pay 0.1% of Rs. 50 lacs (Rs.5,000) as a Franking charge. This fee is however, adjusted with the stamp duty at the time of execution of Sale Deed. Now, at the time of execution of sale deed, you can pay 5.5% as stamp duty instead of 5.6% (which is a prevailing stamp duty rate in Bangalore) to adjust the charges already paid during Franking.
Registration of Documents:
Once the stamp duty is paid, the document has to be registered under the Indian Registration Act with the sub-registrar, of the jurisdiction where the property is situated. The basic purpose of registration is to record execution of document i.e. it records the ownership of the property in case of Sale Deed/ any Title Deed execution and until the title deeds in your name are registered or recorded, you are not officially the legal owner of the house.
The registration fee is paid over and above the stamp duty and vary in different states. The registration fee in Karnataka is fixed at 1% of the value of transaction.
Property Registration Procedure
Following are the requirements/ documents required at the time of registration:
•For registration of a property, both the seller and purchaser need to be present along with their identification documents like Pass Port, Driving License and Pan Card etc.
•The original document printed on one side along with two photocopies of the original; have to be submitted to the registering officer.
•The registration procedure also requires the presence of two witnesses and the payment of the appropriate registration fees.
•Stamp Duty needs to be paid through Collector of Stamps/SDM or a proof of stamp duty needs to be submitted if the stamp duty is already paid
•Payment details for the payment made to the seller needs to be shown
•Khata certificate and tax paid receipt (if required by your state)
Notice of Intimation:
This is specific to the state of Maharashtra and is applicable for those who avail Home Loan for purchase of property and mortgage the “Title Deeds” to any Bank/ NBFC. The filing of notice of intimation came into force from 1st April, 2013. Under the Registration (Maharashtra Amendment) Act, 2010, which amends the Indian Registration Act, 1908, it is now mandatory to inform the state registration office, of mortgage details within 30 days of a mortgage being executed (where the “agreement relating to the Deposit of title deeds” is not executed and registered).
Following is the procedure:
a) In case of Mortgage by way of Deposit of title deed done on 1st April 2013 and thereafter, if an agreement is executed (signed) between the Mortgagor and the Mortgagee, it has to be compulsory registered. The usual time limit for registration is four months from the date of execution.
b) If such agreement is not executed, then the Mortgagor has to file a notice of intimation of such mortgage. This notice should be filed within 30 days from mortgage.
c) When an agreement is executed and registered, then no need of filing of notice of intimation.
d) The non-registration of agreement/non filing of notice of intimation may defeat the legality of the mortgage and cause injury to the interests of parties. Any person who fails to file such notice within the prescribed time limit shall be liable for punishment under section 89C of the Act.
In simple words, the notice of Intimation is a notice given to the Government, by the buyer of a property in case he/ she is mortgaging his/ her property with some Bank/ NBFC. This notice is required to be sent only when an agreement between the Bank and loan applicant has not been registered. The intimation notice should be sent within 30 days of purchasing the property.
The main objective of this amendment is to safeguard the interests of banks and the society. And also with an objective of preventing fraudulent practices like availing loans from multiple banks on same property or disposing of the property which is already mortgaged.
Procedure for filing of the Notices:
The Department of Registration & Stamps, has launched an online application called the “e-Registration Module” for online filing of the said notices. It is available on the Department’s website www.igrmaharashtra.gov.in, using which, the notice of intimation can be prepared and submitted online i.e. without coming to the Office of the Sub-Registrar . The Maharashtra e-Registration and e-Filing Rules 2013 are prescribed for this purposes under section 69 of the Act.