There are many who hold the dream of purchasing a home. Given the high real estate prices in different parts of India, a home purchase now is considered as one of the crucial financial achievements. For most, this dream is attained through a home loan. In case you are eligible for a home loan, the lender may approve the loan of up to 75-90 percent of the property’s value. Remaining 10-25 percent must be arranged from your own pocket. However, besides property cost and housing loan interest rate, you must also factor in various additional expenditures that are attached with property purchase. Two most essential costs involve stamp duty and registration charges.
In case you are looking to buy a property, you must ensure to know as much as possible about it. Doing so would allow you to accumulate sufficient funds to manage your additional expenditures and meet your dream of purchasing a property.
What is stamp duty?
Stamp duty is the tax charged on legal documents usually during transfer of property or assets. It might involve power of attorney, sale deed, conveyance deed, etc. This is a tax that is paid for obtaining any document that facilitates creation, extension, recording, transfer of any liability or right. After you have paid the stamp duty charge, the document becomes legally valid in the court of law.
Why is it necessary to calculate stamp duty?
Stamp duty charge is collected based on the property value during the registration time. It’s value differs from one state to another and the property kind – new or old. As it adds up to the property’s cost, it is better for you to have a rough idea before finalising the deal.
Stamp duty is nothing but a type of legal tax that serves as a proof for any purchase/sale of a property. As the stamp duty charge is a state matter, its rates may differ from state to state.
How is stamp duty calculated?
Stamp duty computation depends on the property’s worth. Every Indian state comes with its own criteria based on which the charge is computed. It is usually paid based on the circle rate that is decided by the government. Also, stamp duty differs on the property type i.e., commercial, or residential, and area type i.e., rural, or urban.
There are three ways based on which you must pay the stamp duty for the property you are close to owning. You may consider making payment via non judicial stamp paper, franking or e-stamping. Also, there are various parameters that are considered for computing the stamp duty charges.
• Property status (old or new)
• Property area (suburban, rural, metropolitan etc.)
• Property location (within the state, the fees may differ between locations and cities)
• Age of the owner (few states offer discounts for the senior citizens)
• Owner’s gender (few states may offer concession to female owners)
• Property usage (residential or commercial)
• Property type (flat or independent house)
You can also calculate stamp duty online using a stamp duty calculator
As lenders do not add in stamp duty and registration fees while assessing your property’s cost, you must arrange such charges from your own pocket. For you to accumulate adequate fees/charges from your own resources, ensure to calculate the approximate stamp duty and registration amount. This would allow you to be better prepared before applying for a home loan.