What Determines Stamp Duty Rates In Property Transaction Cases?

Property transaction cases can be a critical affair. It is imperative for potential property buyers to remember that buying a property doesn’t involve merely paying the property’s price. It also involves ancillary costs to be paid to the authorities to complete the registration process and safeguard the investment in disputes or frauds.
One of the most significant components of these ancillary expenses is stamp duty. It is vital to take it into context while determining the home loan amount and home loan eligibility. But how do we assess stamp duty rates in property transaction cases? This article discusses it all.
What is stamp duty on a property?
The possession of a property, i.e., the physical transfer from the seller to the buyer, is not the only necessity while transferring property. You also require legal evidence of ownership to ensure you do not get caught in a legal coup.
The Indian government levies a tax on property transactions known as stamp duty. It is collected on both residential and commercial property, be it freehold or leasehold. The stamp duty is payable under Section 3, Indian Stamp Act, 1899.
When the buyer gets the property registered in their name at their local municipality with the seller agreeing that they have transferred the exact property to the said buyer, it requires the former to pay stamp duty for carrying out the legal process.
The rates can vary depending on a plethora of factors attached to the property and the owner. However, the approximate percentage varies between 2% to 7% of the property’s value in most cases.
Factors that determine stamp duty charges
When you are looking to buy a new home, it is imperative that you will look to understand your home loan eligibility along with the home loan interest rates for the amount in contention.
Given the complexities involved, we suggest you use a home loan EMI calculator to understand the potential outflow. But before you do so, the key is to remember that stamp duty has to be paid upfront and in full.
Here are the factors determining stamp duty rates –
Property’s age
The property’s age is one of the critical factors in determining the stamp duty rates attached to it. Newer constructions entail a higher rate than older ones in most cases.
Location
Municipalities in metro cities entail a higher stamp duty rate compared to most tier-2 and tier-3 locations. However, if your property is in rural areas or outskirts of the town, the charges would be considerably lower.
Purpose
Personal properties entail a lower rate compared to commercial spaces. It is because the latter have a lot of additional features, such as security, amenities, and more.
Owner’s age
In almost all states, senior citizens get to pay a curtailed stamp duty rate on their property transactions.
Gender
The Indian government is trying its best to empower women in the country. So women in the country get a reduction on stamp duty charges, and male counterparts pay up to 2% more in most cases.
Amenities
The Indian government has listed 20 amenities for which you will have to pay an additional duty for having each of them. The list includes a swimming pool, library, community hall, lifts, and more.
Stamp duty calculation is an amalgamation of a plethora of factors
While the stamp duty rate varies from one state to another, the calculation is done based on a pre-set percentage of the property value, in addition to the amenities available. Therefore, it plays a crucial role in deciding whether you want to buy the said property or not. Having a robust home loan EMI calculator can give you improved insights for making a more informed decision.