Budget 2023Budget 2023


  • Tata AIA Life Insurance
  • Hafele
  • Motilal Oswal
  • SMC Global Securities Limited
  • SBI Life
  • DSP Mutual Fund
Upcoming Event : LeapToUnicorn - mentoring, networking and fundraising for startups. Register now

A first time buyers guide to stamp duty

Ramanathan Iyer of offers guidance on stamp duty and registration. He throws light on processes involved on transaction of property.

Ramanathan Iyer

Stamp Duty basically is nothing but a type of tax collected by the government under its jurisdiction for a transaction of property. The types of property may be freehold or leasehold from land (agricultural and non-agricultural), independent houses, flats to commercial units. As a general rule, Stamp Duty is generally paid by purchasers.

Also read: Having trouble in filing returns? Here's a checklist

Stamp duty in India was first introduced by Britishers in 1899. According to early rules, the Duty has to be deposited in the government treasury for all property transactions, which are done through document or instrument under the provisions subscribed in Indian Stamp Act of 1899 and Bombay Stamp Act of 1958.

The amount, collected by government-appointed Stamp collectors, would go directly to the concerned State under which the individuals are taxed. In many states still the Indian Stamp Act, 1899 is in force.

The percentage of stamp duty levied varies in different states. For example Maharashtra charges 6.5 percent of the property value as stamp duty if the property lies within the city limit, while in Tamil Nadu 8 percent Stamp Duty is collected for all types of property transactions. In this, 7 percent is levied as Stamp Duty and one percent as registration charges.

Tamil Nadu government has introduced its own stamp duty law in May to simplify and streamline transactions of immovable properties and securities. States such as Gujarat, Karnataka, Maharashtra,
Rajasthan and Kerala too have their own stamp law.

Tamil Nadu’s Bill brought some significant changes to the Central law. For example, the addition of sister, brother, husband of predeceased daughter and wife of predeceased son within the definition of family. The central law states that family means father, mother, husband, wife, son, daughter and grandchild.

For those who buy flats, stamp duty is calculated on the basis of the land parcel applicable to the purchaser in the multi-storey apartment. This is known as undivided share (UDS) of the property.

For example, if the apartments made on 2400 sq ft having 10 equal sized apartments, each member has to pay for a stamp duty for 240 sq ft land. The size of UDS varies if the apartment sizes vary and largest portion will be allotted for those having large sized apartments.

Why should one pay stamp duty?

As mentioned earlier, this is a tax inline with sales tax or income tax collected by the Government. Technically speaking, Stamp Duty for any property transactions is paid under Section 3 of the Indian Stamp Act, 1899. Stamp duty is payable in full and on time. If there is a delay in payment, it attracts penalty at the rate of two percent every month on remaining amount and as maximum penalty being levied 200 percent for the unpaid amount.

Another advantage for paying stamp duty is that the document acquires evidentiary value and admitted in any court of law in India as evidence provided the documents are how to pay the stamp duty properly stamped.

How to pay stamp duty?

Now the question comes, how to pay the stamp duty? Many states have simplified the payment procedure. For example in Maharashtra, one can pay the stamp duty online as the government has recently announced linking of all sub-registrar offices across the state for easy payment.

Otherwise, stamp papers, equivalent to the value of the stamp duty, should be purchased in the name of one of the parties involved in the transaction. The amount will be paid at the sub-registrar office of the jurisdiction on or before the execution of the sale deed.

Though in India it has become a practice that only purchasers bear the cost of stamp duty, actually, it is either paid by a transferee or purchaser or as mutually agreed in the agreement between parties.