What is stamp duty? Why should it be paid and by when?
It is a tax and must be paid in full and on time. A delay attracts penalty at 2% per month, subject to maximum penalty of 200% of the deficit amount of stamp duty. Documents lodged with the sub-registrar/superintendent of stamps prior to any amnesty scheme attract a lump sum reduced penalty. Documents not properly stamped are not admitted in court as evidence. It is payable before execution of the document or on the day of execution of document or on the next working day. Execution of a document means putting signatures on the instrument by persons party to the document.
Who pays?
In the absence of an agreement to the contrary, the purchaser/transferee has to pay or in case of property exchange, both parties have to bear it equally.
On what instruments does stamp duty have to be paid?
Instruments include every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of shares, debentures proxy and receipt (which is charged under Indian Stamp Act, 1899). Except transfer by will (or by original nomination in a co-operative society) all transfer documents including agreements to sell, conveyance deed, gift deed, mortgage deed, exchange deed, deed of partition, power of attorneys, leave and licence agreement, agreement of tenancy, lease deeds, power of attorney to sell for consideration etc. have to be properly stamped. When a nominee transfers the flat subsequently in the name of legal heir, such transfer also requires stamp duty.
If you have purchased a flat in a co-operative society on or after December 10 1985, you have to pay stamp duty on market value as per the Ready Reckoner, issued every year in January.
This is a public document, available in any law bookshop. Market value is the value as worked out as per the Stamp Duty Ready Reckoner or the consideration stated in the instrument, whichever is higher. As per a new amendment in the Income Tax act, market value for the purpose of capital gain tax is the same as the market value for stamp duty payment.
How is a flat defined?
A flat means a separate and self-contained set of premises used or intended to be used for residence, or office, or showroom, or shop or godown or for carrying on any industry or business (and includes a garage), the premises forming part of a building and includes an apartment.
In whose name is the stamp paper required to be purchased?
Stamp papers are to be purchased in the name of one of the parties to the document, otherwise such agreement will be treated as if no stamp paper was used. However, it will not make the agreement invalid and can be enforced in Law if proper duty is paid subsequently. Stamp paper is valid for six months from the date of purchase.
What is a revenue stamp?
It is a tax of Re.1 in the form of revenue stamp, which should be affixed on receipt for any money or other property, the amount or value of which exceeds Rs. 5,000.
Is stamp duty payable on the instrument or transaction?
It is payable on instruments. If any information essential for working out stamp duty is missing, the valuation officer can call for it. Information such as the Carpet or Built-up area, number of floors in the building, year of construction, name of Division/Village and C.S./C.T.S. number of plot of land, must be recorded in the agreement for quicker response.
What is the rate of stamp duty?
Stamp duty on non-residential properties whether in a co- operative society or not is at a flat rate of 5% of the market value. Stamp duty on residential flats in a housing society and buildings covered under Article 25(d) of Schedule I of Bombay Stamp Act. 1958, attracts concessional rates depending upon its market value as follows: Upto Rs. 1,00,000 stamp duty is nil Between Rs. 1,00,001 to Rs.2,50,000, it is 0.5% of the value. Between Rs. 2,50,001 to Rs.5,00,000 Stamp duty is Rs. 1,250 + 3% of the value above Rs.2,50,000. Above Rs.5,00,000 stamp duty is Rs.8,750 + 5% of the value above Rs.5,00,000.
What precautions should one take to avoid practical difficulties later?
Generally one copy of the exchange agreement is made and registered and then there are various practical problems.
The following precautions should be taken to avoid complications:
- Assuming there is one 'Flat-A' owned by 'Person AA' and he wants to exchange it with 'Flat-B' owned by 'Person BB'. In the Exchange Agreement there should be a clause where it states that original agreement will be considered original agreement for 'Flat-A' and will remain with it's new owner 'Person BB' and second copy will be considered original agreement for 'Flat-B' and will remain with its new owner 'Person AA'.
- Agreements should be made in duplicate. The original agreement will be charged with full stamp duty and second copy will be charged only with Rs.20.
- Both agreements must be registered. The original agreement will be charged full registration fees and second copy will be charged a nominal amount.
- Both the persons must keep their respective copies and will be free from each other in all respects.
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