Primer on Stamping and Registration for Real Estate

What is Stamp Duty?

Stamp duty is a kind of tax levied by the state government on documents of transactions. Without payment of stamp duty the documents do not have legal validity. They would not be accepted as evidence in courts in case of a dispute.

Paying stamp duty is mandatory

Documents involving property transactions attract stamp duty. All documents including sale agreement, gift, partition, power of attorney, leave and license agreement, lease deeds of property etc require to be stamped. Property being transferred to legal heirs should be stamped.

Stamp duty evasion on property is rampant in India. Penalty for evading stamp duty is rigorous imprisonment of minimum one month and maximum six months along with fine of Rs 5000. In addition if the documents are seized and sent to the Collector of Stamps, he will additionally recover charge 2% per month from the time the document was signed by the parties.

How stamp duty is paid

You can pay stamp duty through stamp paper, using adhesive stamps on or by franking the document. Stamp duty is to be paid before or while parties to transaction put their signature on the document. In legal parlance the document gets executed when parties put their signature on it. At the most stamp duty can be paid on the next day. It must be paid on property documents before they can be registered.

Stamp duty rate varies for different types of documents and vary with states. Once purchased, they must be used within six months or they are rendered invalid. Stamp duty can be purchased and paid in the name of any one of the parties but usually it is the buyer who does it.

Stamp duty is calculated on market value of property or value of purchase/sale, whichever is higher. 

Process of stamp duty payment:

The document to be stamped is taken to the Collector of Stamps of your area along with affidavit or other evidence to determine how much stamp duty is to be charged. This can be done before or after parties have signed. For this process of assessing chargeability, known as adjudication in legal terms, Rs 50 is paid as charge. Once this is done and you pay stamp duty charges you are done.

e-Stamping

In many states e-stamping is in vague. In e-stamping computer generated stamp certificates are issued within minutes of making payment. This can be done by visiting those banks which are appointed agents of SCHIL which is the agency responsible for e-stamping operations. Each certificate has a unique identification number (UIN). 

The certificate can be verified by entering the UIN in SCHIL website. Banks accept payment in cash, cheque, DD, payorder or NEFT. Once created the e-stamp certificate cannot be modified or cancelled. In case you find you have paid less stamp duty additional duty can be paid and an additional e-stamping certificate can be created.

Presently e-stamping is valid in the states of Gujarat, Karnataka, NCT Delhi, Maharashtra, Assam, Tamil Nadu, Rajasthan, Himachal Pradesh, Uttarakhand, UT of Dadra & Nagar Haveli, UT of Daman & Diu and Puducherry.

What is Registration?

Registration is the process of submitting records of documents of a transaction to the registering officer who preserves copies of the original documents. When property is bought it has to be registered with the sub-registrar. Registering sale deed is a way of informing local authorities about the sale and submitting records to them.

Property registration is mandatory

It is important to understand why registration is important. First of all registration is done as a means of informing officials about the transaction. After registration the document is kept at the sub-registrar's office. A future buyer can inspect it to know if the property has clear title and the owner has not pledged it to a bank or financial institution for borrowing money. If document is not registered it remains in the name of the last owner who had registered it. You cannot present the document as evidence in case of a dispute unless it is registered.

Documents relating to sale of property, lease of property, partition of property, gifting of property or Power of Attorney has to be mandatorily registered. Although there is no penalty to be paid for non-registration, you would be charged a penalty for delaying it if you approach for registration after four months of the transaction. Usually 2.5 times the registration fee per month is charged beyond four months and this could go up to 10 times the fee.

Registration fee

For the service rendered by the sub-registrar's office a fee has to be paid. Registration fee is fixed by the state governments. Presently it is charged at the rate of 1% of the market value or Rs 30,000 whichever is higher. This can be paid through Govt challan or payorder of a nationalized bank in favour of the sub-registrar's office.

Process of registration

Documents of property transaction are registered at the office of the sub registrar within whose sub district the property is located. The document must be stamped for the appropriate stamp duty. Along with two witnesses carry the stamp duty paid document and a photocopy of it. The original documented must be printed only on one side in black colour.

All parties to the transaction must be present in person at the sub-registrar's office. Submit the document to be registered along with photocopy and supporting documents including PAN card and photographs. You might have to book token number for registration in prior. When your turn arrives both parties must put their signature on the documents and on a sheet of paper before the sub-registrar. Both parties will also be photographed.

After paying registration fee the sub-registrar verifies documents and the document is registered in half an hour's time.


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