Quite a few formalities take place when purchasing a house. These formalities can be anything from financial obligations to legal paperwork. Having clear and crisp paper when buying a home is mandatory as you will require these legal documents for multiple purposes for the longest period. You should take care of stamp duty, registration charges and other related tasks on priority. A delay or in case of an issue with them can cause you a great deal of trouble. The article will give you a brief overview of the stamp duty and registration charges associated with property purchases that you should know about.
Stamp duty is a specific type of tax levied by the state government on monetary transactions. All property buyers are mandatorily required to pay the stamp duty charges. Failing, they will not be regarded as the lawful owner of the property. This Tax Act came into effect under the Indian Stamp Act of 1899.
To explain stamp duty in simple terms, it is the tax you pay to claim the conveyance deed, title deed, sale deed, and power of attorney paper. The exact duty payable on each document is determined by the actual value and the nature of the property you purchase. The amount is calculated on the higher value of the property.
Since the state government decides the mortgage stamp duty, the amount payable differs from state to state. In addition to the state policy, several factors influence the stamp duty of a property.
The property's location plays a significant role in determining the stamp duty. Different regions or states may have varying stamp duty rates based on local regulations and government policies. Urban or metropolitan areas often have higher rates due to increased property values and demand. Conversely, rural or less developed areas may have lower rates to encourage investment and development.
Some jurisdictions offer concessions or discounts on stamp duty based on the age and gender of the buyer. For instance, senior citizens might receive a reduced rate or exemption as a form of financial relief. You may also notice a discount if the homebuyer is a woman.
The intended use of the property can affect the stamp duty rate. Residential properties might have a different rate compared to commercial or industrial properties. In some areas, primary residences may have lower stamp duty rates to make homeownership more accessible. At the same time, investment properties or commercial real estate might incur higher duties due to their potential for generating revenue.
The property type being purchased—such as a new build, resale, or property in a special development area—can influence the stamp duty.
Properties located in developments with high-end amenities like swimming pools, gyms, or community facilities might be subject to different stamp duty rates. Such amenities can increase the overall property value, impacting the amount of stamp duty payable.
The registration fee is the charge you pay to the government to get a property registered under your name. This fee amount is paid over and above the stamp duty charges. The property registration law was enacted under the Indian Registration Act of 1908.
The central government of India sets the registration fee and, hence, uniform throughout the country. The fee is generally 1% of the total property value. However, note the fee amount may differ depending on the type of property you are purchasing.
No, since stamp duty and registration charges are overhead charges, Home Loan does not cover them. Hence, it is important that keep enough funds aside to meet these expenses beforehand to avoid inconvenience.
You can now calculate the stamp duty on your property easily using the stamp duty calculator. This online tool gives you an approximate idea of how much will the stamp duty cost you by simply a few details. Enter your state of the property and the total value of the property to calculate the amount applicable.
The tax exemption on your registered mortgage stamp duty and registration fee comes under Section 80C of the Indian Income Tax Act. You can claim a tax exemption of ₹1.5 lakh in your income tax return filing per the tax policy. You can also claim tax benefits under Section 80EE and 24(b) for interest on your Home Loan.
If you hold the property with another co-owner, you can claim a tax rebate in your tax filing. However, the upper limit for tax exemption under 80C in joint ownership continues to be ₹1.5 lakh for each applicant.
Now that you have a clear idea about the stamp duty charges for a Home Loan agreement and the importance of getting your property registered. Make sure that you keep these points in mind when buying your dream home.
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