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What Is Stamp Duty? And Factors Determining Stamp Duty Charges

Owning a property, more specifically a house, is one of the most common financial goals. Who doesn’t want to create a sanctuary where he/she can create happy memories? Apart from the emotional aspect, real estate as an asset class is a great portfolio diversification strategy. A property can yield you a steady income that can be used to fulfill other financial obligations. However, purchasing a house is more than just finding your dream one. A home mortgage is the preferred route taken to purchase a property. In addition to the cost of the house, there are a host of other expenses to legally own the house. Stamp duty and registration charges are among the other expenses that add up to the total cost of the property. You should, therefore, be aware of the stamp duty rates and that can be easily calculated via a stamp duty calculator.

What is Stamp Duty?

When you buy or transfer a property, you have to pay a fee called Stamp Duty to the state government. It is an Indirect Tax levied by the state government to legalize the transfer of property from the seller to the buyer. The stamp duty rate is generally 5-8% of the property’s market value. Stamp duty charges are applicable for both the sale and transfer of a property.

Apart from this, a registration charge, usually 1% of the property’s market value is also levied. A registration charge is the cost users pay for the service of putting a contract or a deed in the government’s records. Put simply, it is the cost incurred to register the property documents in your name. 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.

Stamp duty and registration charges are considered overhead charges; they are not covered by a Home Loan. Before availing of a home loan, compare the interest rates of different lenders. Since the interest rate has a bearing on your EMI, you should be aware of the total expense you shall be incurring every month.

How is Stamp Duty Payment Made?

Stamp duty is the evidence that a property has been legally bought or sold and is valid for 6 months. This charge is paid by way of stamp papers. It should be noted that the stamp duty payment must be made in full before the execution of the sale deed, failing which a penalty is levied. The penalty for insufficient payment of the stamp duty will be levied at 2% per month and up to a maximum of 200% on the amount to be paid.

Factors Determining Stamp Duty Charges

A property’s stamp duty is levied by the state government and hence could vary in different states. Stamp duty calculators can be used to find the stamp duty applicable on a given property in any state across the country by entering various details such as property value and the name of the state.

Some of the factors that affect stamp duty charges are:

  • Age of the Property: Since the stamp duty is calculated based on the property’s market value, old properties will attract lower charges than newer buildings.

  • Age of the Owner: Almost all state governments have subsidized stamp duty charges for senior citizens.

  • Gender of the Owner: Many states offer subsidized stamp duty rates if the property is owned by a woman. Men pay about 2% extra to get their property registration documents stamped in comparison to women.

  • Property Usage: Commercial buildings need more amenities, security arrangements, etc and hence attract a high stamp duty fee in comparison to residential buildings.

  • Property Type: Flats and apartments have higher stamp duty charges compared to independent houses.

  • Property Amenities: The type and number of amenities on the property also have a bearing on the stamp duty rates. There’s a list of over 20 amenities such as a swimming pool, club, gym, community hall, etc that you have to pay extra for.

Conclusion

A prudent property buyer considers every aspect and expense involved in the ownership process. Muthoot Finance is one of India’s most trusted financial services companies. They offer many lucrative Home Loan schemes with unbeatable interest rates. With Muthoot Home Loans, your dream home is just a visit away.

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