How to Determine Stamp Duty Rates in Property Cases?

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How to Determine Stamp Duty Rates in Property Cases? 1

If you have ever purchased a property, you might know that stamp duty forms a significant part of the overall cost. The process of property purchase remains incomplete until you pay stamp duty and register your property.

However, have you ever wondered how a stamp duty is determined? How do the officials decide what should be the stamp duty for a particular property? Find out below.

What Is Stamp Duty?

Stamp duty is an indirect tax that is levied by the state government when you purchase a property. Once you have closed the process of buying the property, you can register your property and pay stamp duty as per the applicable rates. It is imperative to pay stamp duty as it validates your ownership and acknowledges that the sale transaction is legal. Stamp duty varies in every state, as it is decided by the revenue department of the state. Usually, the stamp duty for property cases in India ranges from 5-7%. Stamp duty is levied on leasehold properties, commercial, residential, land, freehold, properties etc.

How Is Stamp Duty Determined?

Stamp duty is based on the value of the property. It can be the market value or basis the ready reckoner rate. Ready reckoner or circle rate is the minimum value of the property notified by the government and is revised from time to time. The highest of the two values, the market value and ready reckoner of the property is taken into account for value determination. Stamp duty is also determined based on the gender of the owner. Some states charge a lower stamp duty rate for women as compared to men.

The consideration value of the property and thus, its stamp duty is determined by various factors –

Factors Affecting the Consideration Value of the Property

  • Age of the property

If the property is old or dilapidated, it is most likely to be valued lower. On the other hand, a new and well-maintained house has a higher consideration value. Similarly, you might be charged a higher stamp duty if the property has good amenities like a swimming pool, elevators, etc. Types of homes such as independent houses, apartments can also affect the property value and the stamp duty.

  • Location of the property

The location can alter the value of the property. If it is located within the municipal limits of the city, the property is more likely to be valued more. Naturally, stamp duty for such properties will be higher too. On the other hand, a house situated in the outskirts or remote areas will have a lower stamp duty.

  • Usage of property

If the property were being used for commercial purpose, the stamp duty would be higher as compared to that of a residential property.

You can use a stamp duty calculator to determine the stamp duty for your property. It’s an online tool that gives you accurate results based on details like property value, state, etc. The value of stamp duty is not included in the home loan. However, you can claim stamp duty as a tax deduction of up to Rs 1.5 lakh under section 80C of the Income Tax Act, 1961.   

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