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Buying a home as a first-time homebuyer can be a challenging experience. Finding the right Home Loan provider is crucial, as you need someone who can offer you favourable terms and conditions, as well as affordable interest rates for the loan. However, it is important to remember that obtaining a Home Loan comes with several additional fees and costs, such as processing charges, legal fees, house inspection or maintenance fees, and Stamp Duty charges. Here, we will discuss the meaning of Stamp Duty on Home Loans and its impact.
What Is The Meaning Of Stamp Duty On Home Loans?
Stamp Duty on Home Loans is a direct tax levied under Section 3 of the Indian Stamp Act of 1899. Homebuyers are required to pay stamp duty, which is a way to legalise their sales deed, letters of credit, promissory notes, deed of conveyance, property transactions, and other property documents. Stamp duty charges are in addition to the housing loan interest rate and processing charges, and there are different ways in which stamp duty can be paid.
It is the primary responsibility of the homebuyer to pay the stamp duty. In the case of a property exchange, both the seller and the buyer are liable to pay the stamp duty. The charges also vary from state to state and women homebuyers can benefit from reduced stamp duty charges.
Delays in paying stamp duty can lead to a penalty of 2% per month to 200% and may even result in imprisonment. Changes in stamp duty rates can have a significant impact on your Home Loan. For instance, the government of Maharashtra reduced the stamp duty rate from 5% to 2% until December 2020, which had a positive effect on the purchase and sale of the property. Changes or reductions in stamp duty rates are usually influenced by developer discounts, tax exemptions, or incentives.
How Is Stamp Duty Calculated?
The stamp duty is calculated on the valuation of the property that is being purchased. It considers various aspects, such as:
- The market price of the property
- The age and structure of the property
- The location of the property
- The type of property, whether it’s a home or office use property
- Whether it’s in the urban or rural area
- The number of floors
- The gender of the homebuyer (it’s less for women)
- Whether it’s a freehold or a lease property
- The amenities that are held by the property
- Type of land, whether it’s agricultural or non-agricultural land.
A stamp duty ready reckoner is a registered detailed sheet, especially for Home Loans, which the State Government publishes. The authorities further compare this housing loan stamp duty to the circle rate, and the higher one is selected as the stamp duty on the Home Loan.
When purchasing, the stamp duty paid towards the property is paid to the State Government so that the value may differ from state to state. Different stamp duties applied by different states are as follows:
| City | Charges |
| Delhi | 4% to 6% |
| Bangalore | 2% to 3% |
| Chennai | 7% |
| Mumbai | 4% to 5% |
| Kolkata | 3% to 5% |
Rates are subject to change; this is just an exemplary and educational purpose table.
Different Ways To Pay Stamp Duty
You can pay stamp duty using any of three methods:
E-Stamping
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This is one of the most common and hassle-free methods of paying stamp duty. All you need to do is to visit the official page of SHCIL and use your credentials to log in. You can use several online methods like debit or credit cards to complete the payment.
Franking
There are specified, authorised, and professional franking agents, and you need to take your printed agreement and registered stamp duty on Home Loan charges to one of the franking agents and make the required payment. You could need to pay additional charges along with the stamp duty on Home Loans.
Non-Judicial Or Legal Stamp Papers
Licensed vendors can provide you with non-judicial papers called stamp paper, which carries an amount equal to the registered mortgage stamp duty, for example, getting Rs 50 or Rs 100 stamp duty paper, getting it printed with the required property-related content, and then signed and attested by the required parties and legal authorities.
What Are The Documents That You Need To Pay Stamp Duty For?
While paying your stamp duty, you must carry necessary documents like:
- The property sales deed and agreement.
- Your ID, address, and age proof along with landowners’ title documents, latest bank account statements, last 3 months’ tax receipts, Khata certificate, and BBMP extract certificate.
- Information of power of attorneys.
- Joint development agreement between the builder and landowner and the registered agreement.
- You would also need to submit documents based on all previously signed agreements, 7/12 extract or RTC, conversion order, certificate of encumbrance, electricity bill, approved building plan, Possession/occupancy certificate of the landowner, NOC from Apartment Association, society registration certificate’s photocopy.
What To Do After Paying The Stamp Duty?
After you pay the stamp duty, you must register your Home Loan or property documents. This should be initiated considering the protocols under the Indian Registration Act, which the sub-registrar should process.
The registration of the documents is required to maintain proof of all documents executed under the real estate purchase. Only after the registration process will you legally become the property owner. The registration fee varies from state to state and is normally 1% of the property’s market value or total cost.
Conclusion
It is mandatory to pay the stamp duty on property purchase, without which the legal possession of your house shall be incomplete. Do your homework thoroughly and research the applicable stamp duty charges in your area before you finalise your Home Loan.
These charges are over and above the Home Loan charges and expenses and housing loan interest rate, so you must keep them in mind. You also get the leverage of tax benefits under section 80C when you pay stamp duty, so it is not only mandatory but also beneficial to pay these extra charges to procure ownership of the newly purchased property.
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