Out of many transactions that we come across in our life, one of the significant transactions relate to property which are of utmost value for our State. Hence State has always wanted to build a strong mechanism to synchronise such transactions with a motive of gaining some revenue through the form of stamp duty governed by The Indian Stamp Act, 1899.We will be delving deeper into it after noting the idea of stamp duty in precise form.
Section 3 of The Indian Stamp Act,1899 mandates paying of a fee on the documents required for registering a property or while transferring the title of the property to another where such duty is levied by the state government. This charged fee is required to validate a registration agreement which is thereafter used as a legal document to prove one’s ownership over the property.
KINDS OF STAMP DUTY
The tax payable on execution of documents is precisely called stamp duty but there are certain types of stamp duty as well which have been specified in the following few lines.
- Impressed Stamp – The labels of an impressed stamp are engraved and affixed by way of franking machines in the banks.
- Adhesive Stamp – The stamps which are pasted on any document by way of any adhesive is called adhesive stamp. But this can be further Categorised as:
- Postal Stamps – These stamps which are used for Post office related documentation.
- Non-Postal Stamps: Non postal stamps include revenue stamp, court fee stamp etc.
FACTORS THAT DETERMINE STAMP DUTY CHARGES
Stamp duty is calculated depending on variety of factors which have been discussed over here.
- Property’s age – Stamp duty charges are calculated through market value of property and as the old buildings depreciate with time, their market value diminishes too and as a result stamp duty charges for old buildings is lesser as compared to new buildings.
- Purpose of property – Commercial properties require many other facilities than residential properties like space, security which is why commercial properties strike higher stamp duty than residential properties.
- Location of Property – Urban areas give more exposure and pragmatic amenities to a property than rural or panchayet areas. Hence properties located in urban areas or municipal localities attract higher stamp duty than rural areas.
- Availability of amenities – Availability of amenities like swimming pool, library, gym, sport centres are extra chargeable by the Government.
- Age of the owner – Senior citizens have been given subsidy by the government on account of payment of stamp duty charges.
- Gender of the Owner – Government has provided a discount of 2% to women for the payment of stamp duty charges.
CALCULATION OF STAMP DUTY FOR PROPERTY
Considering the factors mentioned in the above lines, calculation of stamp duty is done through the application of process stated hereinafter.
- The first step involves consideration of total market value of the property. The factors like property’s age, purpose of property determine the market value of the property and if the market value of the property is high then the stamp duty charges will be high as well and vice versa. In the presence of both market value and agreement value of the property, whichever is higher will be charged.
- Other than the monetary evaluation of the property, other factors like location of property, age and gender of the owner, amenities associated with the property, depreciation of property etc determine the stamp duty charges.
- The concerned State government publishes Stamp Duty Ready Reckoner every year on 1st of January to state the fixed value of the property.
PROCEDURE FOR PAYMENT OF STAMP DUTY
There are 3 ways through which we can pay stamp duty which are enumerated below.
- Physical Stamp Papers – This involves purchasing non-judicial stamp paper from authorized seller. Non-judicial stamp paper is a physical stamp paper having stamp engraved on it and allows transaction details to be written on it. Heavy payment of stamp duty requires purchasing of many stamp papers.
- E- Stamping – Stocks Holding Corporation of India Limited has been appointed by the government as the authorised vendor and Central Record Keeping Agency for selling e-stamps and keeping eye on them.
There are many states who have made E-stamping mandatory but it must be made sure by going on the (SHCIL) website to see if the particular state allows so. The website will provide the list of collection centres who issue certificates to those who e-stamp.
Thereafter the application from must be filled up and submitted to the particular collection centre making the due payment for stamp duty through cheque, demand draft, debit card, credit card to get the e-stamp certificate consisting of the Unique Certificate Number (UCN) with an issuing date.
- Franking – This involves approaching a franking agent who could be a bank who again puts a stamp on the document specifying the payment of stamp duty. Thereafter, a franking machine has to be used to frank the document with an adhesive stamp with additional franking charges. However, the franking charges are adjusted with the Stamp duty payable during execution of the instrument.
REGISTRATION OF DOCUMENTS
Registration of document aims to take a note of the execution of the document which further makes the ownership legal.
This involves payment of stamp duty and registration of document under The Indian Registration Act, 1899 with a sub-registrar of the jurisdiction where the property is situated.
It refers to the fee given over and above the stamp duty for the registration of the document within the said jurisdiction and depends on the value of transaction along with the percentage fixed by different states in India.
RELEVANT CASE LAWS
- In Jawajee Nagnatham (vs) Revenue Divisional Officer, 1994 4 SCC 595, the court held that the market value of a property is not supposed to be fixed by the registering authority who collects the stamp duty. It has to be evaluated on the basis of sale deeds of comparable lands.
- In Hindustan Steel Ltd V Dilip Construction Company, 1969 AIR 1241, 1969, the court held that the stamp duty is actually a revenue earning means for the state and therefore The Indian Stamp Act,1899 has been enacted and once this means is ascertained, the litigant claiming on the instrument will win on account of the initial defect in the instrument.
- In Javer Chand and Ors (vs) Pukhraj Surana, 1961 AIR 1655, 1962 SCR (2) 333, the court held that an objection in regard to the authorisation of a document for it being not duly stamped, to be produced as an evidence in a court case, has to be dealt first and foremost.
Payment of stamp duty for the documentation of property registration is a requisite step for being an authorised owner of a property. It is utilised as a source of revenue by the government for it being one of the necessary financial agreements for the involved individuals as well as for the country’s economical, social and implied political conduct. However, it is criticised for being above the cost of the property. Hence it is advisable to the state for reducing the charge and welcoming more players in these transactions to boost the business propaganda and corporate culture.
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