What is stamp
duty? Why should it be paid and by when?
It is a tax and must be paid in full and on time.
A delay attracts penalty at 2% per month, subject
to maximum penalty of 200% of the deficit amount
of stamp duty. Documents lodged with the sub-registrar/superintendent
of stamps prior to any amnesty scheme attract
a lump sum reduced penalty. Documents not properly
stamped are not admitted in court as evidence.
It is payable before execution of the document
or on the day of execution of document or on the
next working day. Execution of a document means
putting signatures on the instrument by persons
party to the document.
Who
pays?
In the absence of an agreement to the contrary,
the purchaser/transferee has to pay or in case
of property exchange, both parties have to bear
it equally.
On
what instruments does stamp duty have to be paid?
Instruments include every document by which any
right or liability is or purports to be created,
transferred, limited, extended, extinguished or
recorded but does not include a bill of exchange,
cheque, promissory note, bill of lading, letter
of credit, policy of insurance, transfer of shares,
debentures proxy and receipt (which is charged
under Indian Stamp Act, 1899). Except transfer
by will (or by original nomination in a co-operative
society) all transfer documents including agreements
to sell, conveyance deed, gift deed, mortgage
deed, exchange deed, deed of partition, power
of attorneys, leave and licence agreement, agreement
of tenancy, lease deeds, power of attorney to
sell for consideration etc. have to be properly
stamped. When a nominee transfers the flat subsequently
in the name of legal heir, such transfer also
requires stamp duty.
 If
you have purchased a flat in a co-operative society
on or after December 10 1985, you have to pay stamp
duty on market value as per the Ready Reckoner, issued
every year in January.
This is a public document, available in any law
bookshop. Market value is the value as worked
out as per the Stamp Duty Ready Reckoner or the
consideration stated in the instrument, whichever
is higher. As per a new amendment in the Income
Tax act, market value for the purpose of capital
gain tax is the same as the market value for stamp
duty payment.
How
is a flat defined?
A flat means a separate and self-contained set
of premises used or intended to be used for residence,
or office, or showroom, or shop or godown or for
carrying on any industry or business (and includes
a garage), the premises forming part of a building
and includes an apartment.
In
whose name is the stamp paper required to be purchased?
Stamp papers are to be purchased in the name of
one of the parties to the document, otherwise
such agreement will be treated as if no stamp
paper was used. However, it will not make the
agreement invalid and can be enforced in Law if
proper duty is paid subsequently. Stamp paper
is valid for six months from the date of purchase.
What
is a revenue stamp?
It is a tax of Re.1 in the form of revenue stamp,
which should be affixed on receipt for any money
or other property, the amount or value of which
exceeds Rs. 5,000.
Is
stamp duty payable on the instrument or transaction?
It is payable on instruments. If any information
essential for working out stamp duty is missing,
the valuation officer can call for it. Information
such as the Carpet or Built-up area, number of
floors in the building, year of construction,
name of Division/Village and C.S./C.T.S. number
of plot of land, must be recorded in the agreement
for quicker response.
What
is the rate of stamp duty?
Stamp duty on non-residential properties whether
in a co- operative society or not is at a flat
rate of 5% of the market value. Stamp duty on
residential flats in a housing society and buildings
covered under Article 25(d) of Schedule I of Bombay
Stamp Act. 1958, attracts concessional rates depending
upon its market value as follows: Upto Rs. 1,00,000
stamp duty is nil Between Rs. 1,00,001 to Rs.2,50,000,
it is 0.5% of the value. Between Rs. 2,50,001
to Rs.5,00,000 Stamp duty is Rs. 1,250 + 3% of
the value above Rs.2,50,000. Above Rs.5,00,000
stamp duty is Rs.8,750 + 5% of the value above
Rs.5,00,000.
What
precautions should one take to avoid practical
difficulties later?
Generally one copy of the exchange agreement is
made and registered and then there are various
practical problems.
The following precautions should be taken to avoid
complications:
- Assuming
there is one 'Flat-A' owned by 'Person AA' and
he wants to exchange it with 'Flat-B' owned by
'Person BB'. In the Exchange Agreement there should
be a clause where it states that original agreement
will be considered original agreement for 'Flat-A'
and will remain with it's new owner 'Person BB'
and second copy will be considered original agreement
for 'Flat-B' and will remain with its new owner
'Person AA'.
- Agreements
should be made in duplicate. The original agreement
will be charged with full stamp duty and second
copy will be charged only with Rs.20.
- Both
agreements must be registered. The original agreement
will be charged full registration fees and second
copy will be charged a nominal amount.
- Both the
persons must keep their respective copies and will be
free from each other in all respects.
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