What Role Does Stamp Duty Play in Home Loan? Know Here. 

Buying a house is a huge financial decision that involves meticulous planning. You need to check your affordability, create a budget, and then look for a home loan to purchase a house if required. However, purchasing a house through a home loan may, it be a 45 Lakh Home Loan EMI or a 35 lakh home loan EMI, does not stop at merely purchasing a property; it also involves many associated aspects such as stamp duty, registration charges, TDS, and GST, which you must not miss on.

Stamp duty and registration charges are among the most important expenses involved in house purchases. You are required to pay a part of your property value as stamp duty and registration charges to finish the purchase process.

Go through the details below to understand more about these charges.

What is a Stamp Duty?

Levied under the provisions of The Indian Stamps Act 1899, Stamp Duty is a tax levied by the government on any transaction involving immovable property. Stamp duty validates your registration for the property and legalizes your property ownership document. The stamp duty is calculated on the entire agreement value or the ready reckoner rate set by the State Government. The stamp duty charges vary from state to state, and might even vary based on gender, as stamp duty is lower for females in many states. In India, stamp duty usually varies from 3% to 10% across various states.

How Is Stamp Duty Calculated?

The stamp duty rate of any property is determined by its value. If a property is purchased for a lesser price than the ready reckoner rate, stamp duty is charged on the reckoner rate value. If the transaction is worth more than the ready reckoner rate, the fee will be calculated based on the deal value rather than the reckoner rate value. For instance, if a property’s agreement value is Rs. 1 crore, but the value as per the reckoner rate is 80 lakhs, then stamp duty will be calculated on the higher value, which is 1 crore.

Alternatively, you can also calculate the stamp duty by using the stamp duty calculator. It is an online computation tool that would help you calculate your stamp duty online.

Various factors help determine the exact value of stamp duty payable. These include the type and market value of the property, its usage, location and age, and gender of the property owner.

What Are the Registration Charges?

The registration charges are levied to get the property purchase registered with the Registrar. Under the Indian Registration Act, the registration of a purchased property must be done within 4 months of the purchase. While registration charges can also vary from state to state, for most Indian states, these tend to be 1% of the property value of the transaction.

By now, you would have understood that the amount quoted by your property seller would not be the final amount you would have to pay to buy your house. These charges are not included in your home loan amount, and you would need to know about these to determine the total amount required for the overall property purchase. A successful purchase, without hassles, requires you to understand every aspect of it during the buying process. Therefore, plan your property purchase carefully, keeping these factors in mind.

When you buy a property in India, the state government levies a certain fee in the form of duty. Stamp duty value is administered by the state government mentioned under Section 3 of the Indian Stamp Act, 1899. This is a tax charged on the transfer of property ownership to validate the registration agreement. You can pay the stamp duty in three ways – e-stamping, non-judicial stamp papers, or franking. Once you pay the stamp duty, you get an acknowledgement receipt that acts as proof of property legal ownership.

Since the amount of stamp duty is determined by the state governments, the rate differs from state to state. Let’s dive into several other reasons behind different stamp duty charges and how you calculate them.

Different stamp duty charges in different states: why?

Note that may it be a 45 lakh home loan EMI or a 35 Lakh Home Loan EMI, all come with a stamp duty charge.

The basic criteria that influence the stamp duty charges across states include:

1. The stamp duty levied on a property will be based on its value in the state where it is located.

For example, in Kolkata, the stamp duty on property worth up to Rs. 25 lakhs is 6%, while in Bangalore, it is 2% up to Rs. 20 lakhs. You can calculate the stamp duty needed for property registration in different states with a stamp duty calculator. Simply select your state and enter your property details to calculate your stamp duty online.

2. The rates of stamp duty vary on the type of property being purchased. For example, commercial properties attract higher rates of stamp duty than residential properties. This is because commercial properties often need tons of amenities, security measures, and floor space.

3. The rules and regulations governing stamp duty and registration charges are constantly changing. This means that the charges you pay today may not be the same as those you would pay if you made a purchase in the future.

4. Stamp duty charges are usually based on the jurisdiction under which your property falls, such as a rural area, city area, suburban, or metropolitan area.

5. Age and gender also affect the stamp duty rates. To encourage more women to own properties, many state governments offer stamp duty concessions to female home buyers. Moreover, many states also offer rebates on the circle rate to senior citizens.

6. Condition and location of the property also decide the stamp duty charges. If the property is new, it can have a higher market value. Moreover, if the property falls in a prime location, its value can be higher.

Besides these, other costs like deeds of partition may also be included that can affect the amount of stamp duty.

No matter what type of property you are purchasing, such as a newly constructed, resale property, or under-construction, paying stamp duty is a must. These charges are usually not included in your home loan amount. Thus, it is important to calculate stamp duty first to determine the total budget for purchasing a property.

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