Your Guide to Stamp Duty and Registration Charges

Planning to buy a home? Congratulations for finally taking the plunge. We are sure that you would have drawn a tentative budget of the various cost involved. But wait, did you include stamp duty and registration charges? Missing out on these two important charges can have a significant impact on your financial planning.

So, what are the stamp duty and registration charges? How are these calculated? We got these and much more answered from our very own legal expert.

Why is stamp duty important?

Stamp duty is a charge payable on the sale agreement, on or before the date of registration of the agreement. It is one of the most crucial documents as it provides legal status to the property transaction.

How much are the stamp duty and registration charges?

Stamp duty varies from 4-8% of the total property cost. It depends on factors such as the location of the property, type of property, property status, and gender.

The registration charges are 1% of the total or registered property value.

How can I calculate stamp duty and registration charges?

Stamp duty is a state subject, and is fixed by the state government. For instance, in Bangalore, the base rate for stamp duty is 5%. There is a 10% cess and 2% surcharge. For rural areas, the surcharge is 3%. So, for urban areas, the rate becomes 5.6%, and for rural areas, it is 5.65%.

Stamp duty is levied only on the total saleable value of the property, which is calculated by first multiplying the size of the property with its guidance value or the market value given by the builder. Then, car parking charges and floor rise, or preferential location charges (PLC) are added to give the total saleable value of the property.

Saleable Value = Basic Cost (Size of property x Guidance Value) + Parking Charges + Floor Rise Premium & Preferential Location Charges (PLC), if any.

Registration charges = 1%of the saleable Value

Thus, the total cost of your property would be the saleable value of the property plus stamp duty plus registration charges.

Can you explain it with an example?

Sure.

Let’s assume you have shortlisted a property sized 1,000 sq. ft. in Bangalore. The guidance value is Rs 5,000 per sq. ft. Next, there is the parking charge of Rs 2 Lakh and floor rise charge of Rs 25 per sq. ft.  Now, let’s say that the property is located on the fifth floor, then your floor rise premium will come up to Rs 125 per sq. ft. (25*5=125). Thus, the total base price will be Rs 5,125 per sq. ft.

Saleable value of the property = 1,000 x 5,125 = Rs 5,125,000 (basic cost) + 2,00,000 (car parking) = 5,325,000

Registration charges = 1 % of 5,325,000 = Rs 53,250

Stamp duty = 5.6 % of 5,325,000 = Rs 298200

Thus, the total cost of property = Rs 5,676,450

How can I pay stamp duty and registration charges?

You can pay these charges in the sub-registrar’s office through the following means:

  • Purchase of impressed stamps from the treasury or authorised stamp vendors
  • Purchase of adhesive stamps
  • Payment to the government through payment of DD/ pay order issued by any nationalised bank/scheduled bank or challan
  • Instrument (document) can be written on plain paper, and the stamp duty can be paid through DD/ pay order issued by any nationalised bank/ scheduled bank or challan within two months of the date of execution of the instrument and certified by the jurisdictional district or sub registrar.

Are there any tax benefits on payment of stamp duty and registration charges?

Yes, you can avail tax deductions for these two charges if paid within the overall limit of Rs 1.5 Lakh. However, there are some conditions attached to it. These include:

•    All the deductions are only valid for a new property and not for resale.

•    The payments must be mandatorily made in the previous financial year as payments done later are not eligible for tax deduction. If you bought a house in 2018 for Rs 50 Lakh and paid Rs 5 Lakh as stamp duty and registration charges, then you are entitled to tax benefits computed during the fiscal year 2019-2020, only if all the expenses have been paid during 2018-19.

•    Only the assessee is authorised for the tax benefits on stamp duty and other registration charges for a particular property, and not any other family member.

•    You can claim tax deductions only for the ready-to-move-in property.

•    As per Section 80C of Income Tax Act, the maximum limit for tax benefit is fixed at Rs 1.5 Lakh.

•    All these tax deductions are only valid for a residential property. As commercial property does not come under the purview of this, one can not avail any tax concession for that.

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