What are Stamp Duty & Registration Charges on Purchasing a property

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Stamp Duty and Registration Charges are two of the most significant additional expenses involved in purchasing a property. Read this post to understand what they are.

It is with the help of a Housing Loan that majority of Indians fulfil their dream of being a Homeowner. Based on your eligibility and certain other factors, a Lender might approve up to 80% - 90% of the cost of the property as a Home Loan. The Borrower needs to pay the rest as a down payment.

Moreover, it is not just the down payment that one should be concerned about. There are some additional expenses, such as Stamp Duty and Registration Charges that have to be paid by the buyer while purchasing a property. Here are some of the most important things you should know about these charges.

What is a Stamp Duty?

Under the Indian Stamp Act, 1899, Stamp Duty is a tax levied on any kind of transaction involving a property and documented through a Sale Deed, Attorney, Conveyance Deed, etc. The legal documents of the transaction are only valid in a court and can be used as ‘Proof of Right’ when the Property Stamp Duty is paid on the transaction.

Stamp Duty is calculated with the help of a ready reckoner rate or the minimum property value set by the State Government. The Government considers factors, such as the location, market value, amenities, property type, etc., to fix the ready reckoner rate.

How is Stamp Duty calculated?

The Stamp Duty charge varies significantly across States in India and ranges between 3.5% - 8%. It is applicable on the ready reckoner rate or the property value, whichever is higher. For instance, if the agreement value of a property is Rs 1 crore and the ready reckoner rate is Rs 80 lakh, the Stamp Duty will be applicable on the agreement value.

Factors like the property status, area, location, owner’s gender, owner’s age, etc., also impact the Stamp Duty calculation.

Here’s a quick overview of Stamp Duty, across some States of India:

What are the Registration Charges?

Under the Registration Act, 1908, a property should be registered within 4 months from the date of agreement execution. After paying the Stamp Duty, every document of the property transaction is registered by the local Sub-registrar, to confirm that the said property is located at the address stated in the documents. The property documents are of no value, unless registered by the Sub-registrar.

The Registration Charges is the fee you pay to the Government for this registration process. The Registration Fee is applicable on the market value or the agreement value of the property, whichever is higher.

How is the Registration Charge Calculated?

In majority of the Indian States, the Registration Fee is 1% of the market value or agreement value of the property, whichever is higher.

There are some exceptions like Kolkata, where the Registration Charges are 1.1% when the property's market value is above Rs 25 lakh and 1% when the market value is less than Rs 25 lakh.

Being an informed Property Buyer

The key to successfully purchase of a property is to clearly understand all the critical aspects of the buying process. As Stamp Duty and Registration Charges are critical to any property transaction, it is essential to know about them in detail, to be considered as an informed buyer.

As these additional expenses are excluded from the Home Loan amount, you'll have to pay them from your own pocket along with the down-payment. So, plan your purchase accordingly, to avoid any hassles and ensure that the property transaction fulfils all the legal obligations.

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