Jan 21, 2007

Purchasing Property: Stamp Duty

Stamp Duty is a tax, similar to income tax ans sales tax, collected by the government. The stamp duty is paid by the buyer of the property. It is payable on the market value of the property or the agreement value, whichever is higher.

The purchase agreement of a property does not become legal until it is executed by the government, for which a stamp duty is paid. Only the instruments that are properly stamped can be admitted as evidence in court.

Value of stamp duty is fixed by the government and varies from locality to locality. It is calculated per spare feet. The government assesses the market value of the property every year. The revised rate fixed by the state government is published in the Ready Reckoner. It is applicable since Jan 1, 2007.

Stamp duty is payable before or on the day of execution of the document, or on the next business day. Any delay attracts penalty at the rate of 2% a month on the deficit amount of the stamp duty. The maximum penalty is 200% of the deficit amount of the stamp duty.

In Mumbai that means an additional cost of 5% on the property/market value, whichever is higher. A similar chart exists for lease agreements.