Stamp Duty and Registration Charges: Definition, Rates, and Calculation

Purchasing a property requires significant financial planning. Owning a house can serve many purposes. For some, the goal is post-retirement investment. For others, real estate could be a portfolio diversification strategy. A home loan with an affordable interest rate is a great way to purchase a house. Availing of a home loan is a smart idea as you can claim multiple tax benefits on the home loan. A home could also be mortgaged later to secure financing to meet financial needs.

A home buyer should be aware of the additional expenses apart from the cost of the property. Stamp duty and registration charges are overhead expenses that add to the total cost of the property. The stamp duty rate can be easily calculated using a stamp duty calculator. Registration fees have to be paid to legally register the sale deed of a house. A Land Registration fee is applicable on the purchase of a plot of land.

What is a Stamp Duty?

Stamp duty is an indirect tax imposed on the sale of property/property ownership by the state government. It is payable under Section 3 of the Indian Stamp Act, 1899. Factors like age, usage type of property, location, amenities of the property as well as the age and gender of the owner determine the stamp duty rates. Senior citizens and women property owners are eligible for subsidized stamp duty charges in some states. This charge is applicable for both the sale and transfer of a property.

A stamp duty payment can be made via:

• Non-judicial stamp paper method

• Franking method

• E-stamping method

What is a Property Registration Fee?

Property registration fees, including land registration fees, are by and large decided by the Central Government. A home registration fee is a cost incurred to register the property documents in your name and enter the same in municipal records. How the registration of the documents shall take place is governed by The Indian Registration Act, of 1908. A buyer is responsible for paying the stamp duty and registration charges, even though the law doesn’t specify that the buyer must bear the cost. A registration charge is generally 1% of the property’s market value.

It should be noted that stamp duty and registration charges are additional costs that aren’t considered when applying for a mortgage or home loan. Before availing of a home loan, do compare the interest rates of different lenders, among other things.

Stamp Duty and Registration Fee Rates

Since Stamp Duty is levied by the state government, it varies with the state in which the property is located. The stamp duty rate generally ranges between 5-8% of the property’s market value in most states.

A registration charge including the land registration fee is generally 1% of the property’s market value across states. However, in some states, the registration fee could be different based on the age and gender of the home buyer.

Stamp Duty Calculation

There are different parameters for different states that determine the Stamp Duty Calculation.

• Type of Property: Some states consider the constructed area for calculating stamp duty and registration charges for independent and the ‘built-up area’ for flats and apartments.

• Guidance Value: The stamp duty calculation is primarily done based on the Guidance Value of a property; it is the minimum value at which the property should be registered.

• Stamp Duty Ready Reckoner: Many states have a Stamp Duty Ready Reckoner to fix the property value. The Stamp Duty charges are a percentage of the property’s market value. The Stamp Duty Ready Reckoner is published by the concerned state government every year on 01 January.

• Cess and Surcharge: Additional taxes such as cess and surcharges are also applicable on registration and stamp duty charges.

Stamp Duty Calculator

There are several online Stamp Duty Calculators that you can use to calculate the stamp duty rate you will be asked to pay. After entering basic information such as Total Property Value and the state in which the property is located, you can get an estimation of the applicable stamp duty. You could also visit a property registrar’s office to enquire about the same.

Conclusion

Being aware of the property purchase process, including stamp duty and registration charges can save you from nasty surprises later. This enables you to shortlist properties within your budget and makes financial arrangements accordingly.