WHAT IS A STAMP DUTY?
Stamp Duty is a tax paid to the government for all property related transactions. It is levied to serve as an evidence for transactions that involve two or more persons and can be admitted in court as an evidence or proof of transaction. A stamp paper bought in the buyer’s or seller’s name expires after 6 months for which the stamp duty is to be paid on time.
WHAT YOU SHOULD KNOW ABOUT THE INDIAN STAMP ACT, 1899?
- Section 3 of the Act provides for the regulations that govern payments of stamp duty.
- Delay in the payment or failure to pay the prescribed amount is a punishable offense.
- If Stamp Duty has not been paid for the required document, then such a document cannot be legally enforceable.
- The rate charged for a Stamp Duty is determined by the state.
- Instruments on an impressed stamp are to be written such that the stamp is made to appear at the front part of the instrument and the same cannot be applied or used in another instrument.
- Adhesive stamps must be canceled to prevent it from being reused.
- Where the adhesive stamp is not duly canceled, then such an instrument will be validated for lack of stamp duty.
- No correction is to be made on an instrument that has been stamped.
WHEN YOU CAN PAY STAMP DUTY ON PROPERTY REGISTRATION?
It is mandated that you should pay a stamp duty for the purchase of a property at the time of its registration. The amount to be paid depends on the state and whether the property is either old or new. However, the national government has fixed amounts for stamp duty on certain instruments.
WHAT ARE THE DOCUMENTS THAT REQUIRE STAMP DUTY?
Below is a list of the documents that attract the stamp levy:
- Partnership Agreements: This is an agreement between two or more persons that state the purpose of the partnership, responsibilities of the partners, the extent of liabilities and distribution of the gains or loss to each of the partners. An average of Rs 1000 is spent on the Stamp Duty for this a Partnership Agreement.
- Articles of Association: All article and memorandum of the association have their fees as prescribed in Rules 10/39 of the 1899 Indian Stamp Act and is based on the location of the entity.
- Partnership Firms Registration: This is not compulsory but there are advantages and benefits that come with it. Each of the states has its prescribed fees for the registration of partnership firms.
Other documents are:
- Instruments of transfer
- Deed of partition
- Gift Deed
- Letters of Credit
- Bills of Exchange and Promissory Notes
- Tenancy agreements
- License Agreement
- Certificate of Sale
- Mortgage Deed
- Reconveyance of a mortgaged property
- Power of Attorneys
WHAT ARE THE STAMP DUTY RATES FOR STATES IN INDIA?
Stamp duty rates for most of the states are as listed below:
| State | Stamp Duty Rate |
| Assam | 8.25% (consideration) |
| Goa, Daman & Diu | 8% (consideration) |
| Haryana | 12.5% (Consideration) |
| Madhya Pradesh | 7.5% (Market value) |
| Chhattisgarh | 7.5% (Market value) |
| Nagaland | 7.5% (consideration) |
| Punjab | 6% (consideration) |
| Tamil Nadu | 8% (Market Value) |
| Rajasthan | 11% (Market value) |
| Uttar Pradesh | 8% (Market value or Consideration) |
| Tripura | 5% (Consideration) |
| Delhi | 8% (consideration) |
| Kerala | 8.5% (Property within the municipality) |
| Meghalaya | 4.6% (Rs. 50,000 worth of property)
6% (property between Rs 50,000 – Rs 90,000) 8% (Rs 90,000 – Rs. 1,50,000) 9.9% (above Rs. 1,50,000 with consideration) |
| Bihar | 7% + (2% duty on transfer) |
| Jharkhand | 7% + (2% duty on transfer) |
WHAT ARE THE TYPES OF STAMP AND STAMP PAPERS USED IN INDIA?
The two types of stamps that are commonly used in India are impressed stamps and adhesive stamps.
- Impressed Stamps: Labels that are affixed and impressed by the official are usually included in impressed stamps. In most cases, these stamps are engraved on the stamp paper. Franking machines are usually used for the impression of these papers at the banks. Impressed stamps are mostly used for documents.
- Adhesive Stamps: These are labels that are stuck on the documents or instruments. They are of two types namely: postal and non-postal stamps.
WHEN SHOULD STAMP DUTY BE PAID?
Stamp duty should be paid either on or before the date of implementation of the legal transaction. This is the acceptable standard for the payment of stamp duty to the authorities. Implementation of the legal transaction implies the signing of the documents by the parties in the agreement. This implies that the stamp duty must be placed before the signatures of the parties are affixed in the document.
WHAT IS THE PUNISHMENT FOR NON-PAYMENT OF STAMP DUTY?
The punishment for the violation of the payment of stamp duty is between 2% to 200% of the required amount. The stamp paper must be purchased by one of the parties in the transaction. The validity period of the paper is 6 months from the date of payment of the stamp duty.
WHAT ARE THE WAYS BY WHICH ONE CAN PAY FOR STAMP DUTY?
Payment of stamp duty can be done in three ways which are:
- Physical stamp paper
- Franking and
- E-stamping
Physical Stamp Paper:
This is the most common ways by which stamp duty and other payments for registration are made. The non-judicial stamp paper is sold by independent vendors and your transaction details will be featured on them once they are purchased by you. It is often difficult to locate a vendor and in most cases, it is usually in short supply. This method is usually not preferred by many because you are required to buy more stamp papers if the stamp duty to be paid is high.
E-stamping:
The e-stamping method was introduced by the government to simplify stamping and to avoid incidences of counterfeit stamps papers. This method of payment is compulsory in most of the states. E-stamping is carried out online. The official vendor of e-stamp is the Stock Holding Corporation of India Limited (SHCIL) and keeps the record of the electronic stamps in the country on behalf of the government.
E-stamping is available on the SHCIL website where you will choose your state to confirm its e-stamping status. Here, you will be able to obtain information on the list of transactions that require e-stamp and the collection centers where the e-stamp certificates would be issued. You will be required to download and fill the application form which will be submitted to the collection centers along with the amount charged for the stamp duty.
E-stamping offers the advantage of convenience and authenticity which can be verified online. Payments for the stamp duty charge can be made through credit cards, online banking, debit cards, bank drafts and cheques. The Certificate that will be issued to you after you must have paid for the stamp duty comes with a unique number and an issue date.
Franking:
In this method, an authorized agent will affix a stamp on your document which will imply that you have made payments for the stamp duty. This is usually carried out in the bank. Therefore, it is essential that you visit an authorized bank with a franking agent to get your document stamped before you execute that transaction. Each of the states has its prescribe own franking amount.
WHAT ARE THE DIFFERENCES BETWEEN JUDICIAL AND NON-JUDICIAL STAMP PAPER?
- Judicial Stamp paper is used mainly in courts for the payment of court fees while Non-Judicial Stamp Paper is used mainly for the execution of legal documents.
- Judicial stamp papers are used mainly for judicial activities while non-judicial stamps are used in documents and transactions like agreements, real estates, power of attorney and much more.
- Stamp duty that is paid for Judicial Stamp paper is in accordance with the Court Fees Act, 1870 while non-judicial Stamp paper fees are paid in accordance with the Indian Stamp Act, 1899.
WHAT ARE THE FACTORS THAT DETERMINE YOUR STAMP DUTY CHARGES?
- Years of the existence of the property: How old the property have been in existence has a major role to play in determining the amount you are required to pay for the stamp duty. The market value of the property determines the amount your to be charged for stamp duty which is often calculated as a percentage of the market value. You are certain to pay less in terms of stamp duty for an old building as you would for a new one.
- Age of the owner of the Property: Senior Citizens tend to pay less for stamp duty because of the government’s subsidy for their category.
- Gender of the owner: Stamp duty charges in India have been discounted for the women. Men often pay an extra 2% more than women.
- Purpose of the Property: Owners of commercial buildings are charged higher as compared to owners of residential buildings. The reason for this is that commercial buildings require more space, amenities and security features.
- Location of the property: The area where the property is located will determine the amount you will pay for stamp duty. Owners of properties in the cities and urban settlements tend to pay more than owners with properties in the rural areas.
- Amenities: You are certainly going to be charged by the government if you an extra amenity in the premises before your property is registered. Some of the amenities as listed by the government which you will have to pay more for include swimming pool, lifts, gym, club, sports area, and community hall.
WHAT IS THE PROCEDURE FOR THE REGISTRATION OF DOCUMENTS AFTER STAMP DUTY IS PAID?
Once the payment of stamp duty has been completed, the document must be registered with the sub-registrar in accordance with the provisions of the Indian Registration Act. Where the transaction involves the sale of property, the registrar must be in the area where the property is located. Registration legalizes the document and it perfects the transfer of the ownership of the property from the seller to the buyer.
WHAT HAPPENS IF THE AMOUNT YOU PAY FOR THE STAMP DUTY IS INADEQUATE?
It is an offense against the law to pay less amount for stamp duty of your property. Many people are guilty of the crime of undervaluing their property to escape higher stamp duty charges and registration fees. If you are caught in the act, you might be imprisoned or be fined heavily.