Calculating Stamp Duty: All You Need to Know

Buying a home involves an array of expenses in addition to the cost of the house. So, it’s important that you factor in all such expenses when drawing up a budget to ensure there are no unpleasant surprises later on. Stamp duty and registration charges are two such costs to consider. The Indian Government levies a stamp duty tax on your home purchase transaction at a pre-meditated rate. This is an unavoidable process, as it legalises your purchase documents and is required by law. Read on to learn more about stamp duty and how to calculate stamp duty. Importance of Stamp Duty Stamp duty establishes you as the legal owner of the property you are buying. Taking physical possession of the house is not enough and you have to register the property in your name in order to have ownership. Once you pay the required stamp duty tax you will be able to get a stamp on all your home purchase papers, certifying you as the legal owner of the property. When is Stamp Duty Payable? You have to pay stamp duty at the time of registering your property. The stamp duty tax is levied on the monetary transactions you undertake basis the conveyance deeds, sale deed, and power of attorney papers in order to complete your home purchase. How is Stamp Duty Calculated? Though stamp duty is governed by the laws of the Indian Stamp Act, 1899 and the Bombay Stamp Act, 1958, most states make minor amendments to the same. Owing to these alterations, stamp duty varies across Indian states and typically you will have to pay 5–7% of your property’s market value as stamp duty. Recently, in Maharashtra, the rate went up from 5% to 6%. If you’re wondering how stamp duty is calculated, note that it is a fixed percentage of either of the following two factors. On the Total Value of the Property Here, the property value at the time of registration is used to calculate stamp duty. Thus, the stamp duty increases or decreases according to the property value. Your best move will be to register your property without much delay and pay stamp duty on it before the property’s value appreciates. As per the Circle Rate Here, the stamp duty is calculated based on the circle rate of the property, which is determined by the local real estate authorities. The circle rate is the minimum value at which a property can be sold. Here, the one that is higher is taken into consideration. For instance, if the circle rate is higher than the property value, then the stamp duty is calculated as a fixed percentage of that rate. 5 or 7% may seem like a small amount, but stamp duty can go up to several lakhs. Therefore, you should calculate stamp duty charges using the stamp duty calculator in advance. Once, you arrange the funds for stamp duty and registration charges, start scouting for a low interest rate home loan in order to complete your home purchase.