Stamp duty, stamp tax, or documentary tax is a type of tax levied during the documentation of the transfer of property ownership. In India, stamp duty is not imposed on a home loan amount. It can be levied on an immovable property like a home brought through a home loan amount.
Stamp duty is usually levied through a sale deed drafted between a buyer and a seller while transferring the ownership of a home or other immovable property.
What is Meant by Stamp Duty on a Home Loan?
Stamp duty is usually paid based on the market value of the property under consideration and not the loan amount. The buyer is generally entitled to pay the stamp duty.
State governments levy stamp duty during property ownership transactions to generate revenue and discourage frequent property transfer.
Traditionally, a physical stamp with its corresponding amount will be attached to a legal document as proof of the stamp duty payment.
How is Stamp Duty Calculated?
The stamp duty value is usually calculated as a percentage of the value of the property being transferred of ownership or based on the value of the legal document.
The stamp duty value, however, can be influenced by the following factors:
- The jurisdiction of the property as each State government has a different stamp duty rate determining method.
- The rate may differ based on the kind of transaction documentation, like the sale deed, gift deed, and so on.
- The market value of the property.
Documents required for stamp duty
Below are the documents you must have in hand for stamp duty on your home loan.
1) The original and signed sale deed between the buyer and seller.
2) Proof of payment of the stamp duty (tax levied by the government on property transactions.)
3) Copies of the PAN (Permanent Account Number) card of both the buyer and the seller.
4) Government-issued identity proof of both the buyer and seller, such as an Aadhaar card, passport, voter ID, or driver’s license.
5) Address proof of both parties.
6) A property card or encumbrance certificate that shows the legal ownership.
7) No Objection Certificate (NOC)
8) Passport-sized photographs of the buyer, seller, and witnesses.
9) Identification documents of witnesses.
10) Power of Attorney (if applicable)
11) Society Share Certificate (if applicable)
12) Recent bank statements may be required to verify the payment of stamp duty.
For properties in a housing society, the original share certificate issued by the society to the seller must be provided.
Development Agreement and Approved Building Plan (if applicable):
In the case of under-construction properties, the development agreement and the approved building plan by the local authority must be submitted.
Payment Proof:
Proof of payment made towards the purchase of the property, such as bank statements, demand drafts, or cheques, which may be required to verify the transaction.
Affidavit (if applicable):
An affidavit from the seller declaring that the property is free from any legal disputes or encumbrances.
Form 60 (if PAN is not available):
If the buyer or seller does not have a PAN card, Form 60 must be submitted as a declaration.
It is best to consult a lawyer or meet with a professional before you pay your stamp duty.
How to Save on Stamp Duty Charges?
There are some legally potential ways in which you can save on stamp duty charges as listed below:
- Registration in a woman’s Name
- Low-end projects
- Lower undivided share
- Invest in projects that offer stamp duty waivers
- Negotiating with the seller
Registration in a Woman’s Name
Some states offer discounts on stamp duty for female property buyers. You can explore this option if it is applicable. You can inquire about this option in the State government’s official website on housing or real estate.
Low-end Projects
Stamp duties on property or homes under construction are usually lower than those on a completed project. However, this option is subject to variation across state government policies.
Lower Undivided Share
Stamp duty is generally allocated based on the individual share value in a larger property. If you purchase a larger property, ask for a lower undivided share to incur lower stamp duty.
Invest in Projects that Offer Stamp Duty Waivers
Certain projects offer stamp duty waivers to encourage purchasing of the property. You can, therefore, choose to invest in projects that provide stamp duty waivers.
Negotiating with the Seller
You can negotiate with the seller to bear the cost of the stamp duty, at least a portion of the stamp duty.
Factors influencing stamp duty
The location of the property
Stamp duty rates differ for urban and rural areas. Properties in urban areas have a higher stamp duty than property in rural areas.
Age and gender of the owner
Senior citizens and women have some stamp duty benefits that can reduce their stamp duty rates.
Property usage
The purpose for which the property is purchased can also influence stamp duty rates.
The type of property
The type of property, whether it is commercial or residential, can impact stamp duty rates. Commercial properties have a higher stamp duty than residential ones.
Government schemes and incentives
You can avail of stamp duty rate reduction under applicable government schemes and incentives.
Joint ownership
Joint ownership can reduce stamp duty rates as it is calculated based on the combined ownership.
Tax benefits on stamp duty and registration charges
You can claim tax benefits on stamp duty under Section 80C of the Indian Income Tax Act. This act allows you to get a maximum deduction of Rs. 1.5 lakhs in your income tax return filing.
If the property is under joining ownership, you both can claim tax reductions based on the shares you have.
Note: Additional expenses like admission fees, post-occupancy renovations, share costs, etc., will not come under this reduction.
Conclusion
Stamp duty is an essential additional cost incurred during the documentation of property ownership transfer. Not paying proper stamp duty charges can void the transfer documentation. So, look into the charges applicable to stamp duty while documenting your property ownership transfer and pay them appropriately.
FAQs
Stamp duties are taxes levied by the state governments to generate revenue and prevent frequent property transactions.
Yes, stamp duty can be refunded when excess stamp duty has been paid, unused stamp papers, cancellation of a sale deed before registration, or under a court order that mandates the return of a property due to legal disputes.
Stamp duty paid can be deducted through Section 80 C of the Income Tax.