What happens if you don't pay stamp duty?

If you are unable to pay the stamp duty on time, you will have to pay a penalty of 2% per month on the deficit amount.

What is Stamp Duty? - Meaning and How to Pay it

Q: Is stamp duty tax deductible?

Yes, you can claim a deduction of up to Rs.1.5 lakh on the stamp duty as per Section 80C of the Income Tax Act.

5 min 13 Mar 2024

Highlights

Stamp Duty: Meaning
When is the Stamp Duty Payable?
Documents Required for Stamp Duty
Factors Affecting Stamp Duty Charges

What is Stamp Duty?

Stamp duty on Home Loan is a legal tax payable that acts as an evidence for property related transactions. This tax is charged by the state government and its rates are different across all states. Section 3 under the Indian Stamp Act 1899 mandates stamp duty payment for all who wish to register their properties.

There are several costs associated with the Homebuying process aside from the Housing Loan, such as the stamp duty. Stamp duty charges varies from state to state. Note that no lender covers stamp duty charges under the purview of your approved loan amount.

When you pay your stamp duty along with the property registration charges, it serves as a legal proof that declares your ownership of the property in any court of law.

Read on to learn the factors that define the stamp duty.

When is the Stamp Duty Payable?

The Stamp Duty charges for a Home Loan agreement are supposed to be paid before the execution of transactions.

What is the Penalty Charge?

Any delay in the payment of stamp duty attracts an extra charge from the home buyers, which is often referred to as the penalty charge. To avoid any extra charges, it would be prudent for property buyers to pay the necessary stamp duty charges on time.

Does Everyone Pay Stamp Duty?

As a homebuyer in India, it is mandatory to pay the stamp duty and registration charges for a housing loan. This fee is levied by the state government and not the lender. It validates you as the rightful owner of your property.

Read Also: Types of Housing Loan Charges

Documents Required for Stamp Duty

Transfer instruments
Reconveyance of mortgaged property
Deed of partition
Certificates of sales
Exchange deed
Gift Deed
Tenancy agreement
Licence agreement
Power of attorneys
Lease deeds
Mortgage deed

Note: This is just an indicative list. You may be asked for more documents during the registration process.

Factors that Affect Stamp Duty Charges

A host of factors determine whether your stamp duty will be high or low.

Property’s Age: The age of the property in question plays a vital role in determining the stamp duty you will pay
Owner's Age:  Nearly all state governments offer concession on stamp duty for senior citizens. So, your age determines the amount you will owe as stamp duty charges.
Owner's Gender: Female homeowners, just like senior citizens, enjoy a discount on their stamp duty in some states. This happens only if their name is used in the property's purchase and registration.
Property Type: You may pay higher stamp duty charges if your property is a commercial building. Commercial buildings rank significantly higher than residential buildings, stamp duty-wise, as commercial buildings demand more amenities, such as floor space, and closed-circuit cameras.
Property’s Location: Properties sited in a municipal area or a suburban area can expect a higher stamp duty. Buildings on the outskirts of town and city may incur a lower stamp duty fee

Read on to learn more about the mortgage registration charges that you have to pay alongside the stamp duty.

What are Property Registration Charges?

Property registration charges also go towards registering your property legally at the time of the sale transaction.

Just like stamp duty, property registration charges are also not covered by the Home Loan sanction amount.

Additional Read: What is a Home Loan Sanction Letter?

How to Pay Your Stamp Duty and Property Registration Charges?

Now that you know what stamp duty is and how it’s determined, here’s how to pay:

Estimate your property's value and calculate the stamp duty
Purchase non-judicial stamp papers from an authorised seller if you want to pay offline
In case you want to pay online, you can visit the official website of your respective state government and follow the instructions

Claim Tax Benefits on Stamp Duty

When purchasing a house, a buyer is eligible to claim tax deductions on stamp duty and registration charges or any property transfer-related expenses under Section 123 of the Income Tax Act. Accordingly, they can get a deduction of up to Rs.1.5 Lakh. Both individuals and HUFs are eligible to claim these deductions. However, it is essential to note that you must claim the tax in the same financial year as the one in which you are purchasing or constructing the house.

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