Stamp duty is a common term associated with property transactions. While most of us know of it as a charge paid to the government on purchase of a property, there is more about the term that we can learn.

A stamp duty is the tax placed on legal documents, usually in the transfer of assets or property. In India, it is levied by the state government, hence varies from one state to another. Stamp duty is charged on both commercial and residential property transactions, including leasehold or freehold properties and is paid by the buyer. While possession is the physical transfer of the property, legal effectiveness of the documents is established only when the stamp duty has been paid on registration of the property.

Stamp duty is calculated on the higher value, between the ready reckoner rate or circle rate and the agreement value of property. For example, if the agreement value of a property is ₹50 lacs and the value according to the ready reckoner rate is ₹40 lacs, then, the stamp duty would be calculated on the higher value, i.e., ₹50 lacs.

At present, the stamp duty in Maharashtra is 5%. Last month, the state government proposed to levy a 1% surcharge on stamp duty, which is still under review. The stamp duty percentage depends on several factors, such as:

Age of the property

Old buildings usually attract less stamp duty charges and new buildings attract a high charge. This is because the market value of old buildings would have depreciated.

Age of the Owner

Most state governments have subsidized stamp duty charges for senior citizens.

Purpose

Commercial buildings attract a high stamp duty fee when compared to residential buildings. This is mainly because commercial buildings would need a lot of amenities, floor space, and security features.

Location

You will be required to pay a high stamp duty if your property is located in a municipal locality or an upscale urban area than if your property is located in panchayat limits or outskirts of the town.

Amenities

The government has a list of over 20 amenities that you will have to pay extra for if you have them on your property.

HOW TO PAY?

There are three ways to pay the stamp duty - through non-judicial stamp paper, by franking method or by using the e-stamping method.

The non-judicial stamp paper is the traditional way of paying the stamp duty. The agreement details are written on a paper, which the executants sign after validating. After 4 months, it is registered at a sub-registrar office.

Under the franking method, the agreement is printed on plain paper. This paper is submitted to an authorized bank, which processes the documents through a franking machine.

You can also pay the stamp duty amount online, through RTGS/NEFT. After which, the stamp duty certificate, with details such as the date, stamp duty type, etc; can be downloaded for the registration process. In Maharashtra, you can do this via the Government Receipts Accounting System (GRAS) website.

Payment procedure through GRAS

• Visit the GRAS website
• Click "Pay without Registration"
• Select payment mode as "e-payment"
• Select department name as "Inspector General of Registration"
• Select payment type as "Non-Judicial Stamp Duty Customer Payment" or "Registration Fees"
• Select applicable "Scheme Name"
• Select applicable "Office Name" where you want to visit
• Select applicable "Period (year)" as current financial year
• Select "One Time/Adhoc" in next selection box
• Enter payment amount in "Amount"
• Select applicable "Article Code"
• Enter party details, one from each side
• Select "Bank" from drop list through which payment has to be done
• Challan will be generated in the "MTR Form Number 6"
• Verify the details of challan
• Proceed for payment

Note: Any correction or modification cannot be made after generating the payment receipt

Sometimes people undervalue the price of the property in the agreement to save stamp duty, which results in a revenue loss to the government. In Maharashtra, if the stamp duty is not paid on time, it attracts a penalty at the rate of 4% per month on the deficit quantity of the stamp tax but limited to a maximum of 400% of the deficit quantity of the stamp duty.