What is Stamp Duty and why it is important in Home Loan?

A home is where the heart resides. We all look around for shelter which includes all the basic amenities, such as water supply, a well-built kitchen and bathroom, a spacious hallway, and strong yet beautiful interiors. If you are taking a Loan to get the funds for a home purchase, you must comply with the legal paperwork required by the lender. You would have to submit many documents like income proof, identify proof, etc., apart from filling and submitting different forms.

Also, you must take care of the property registration process, paying the registration fees, and stamp duty charges on Home Loan. Any delay in this process can cause a great deal of trouble for you and can have legal implications. In this blog, we give you an overview of the registration charges and stamp duty on Home Loan.

Stamp Duty and Registration Charges are two of the most significant additional expenses involved in purchasing a property. In simple terms, stamp duty for a new home loan is the tax you pay the government to claim the title deed, conveyance deed, sale deed, and power of attorney (as necessary). The amount you pay as stamp duty varies based on the type of property you buy and its purchase value. Stamp Duty is calculated with the help of a ready reckoner rate or the minimum property value set by the State Government. The Government considers factors, such as the location, market value, amenities, property type, etc., to fix the ready reckoner rate.

Apart from the state policy, there are many other factors that influence the Loan agreement stamp duty on real estate assets, which are:

The property’s location:

An important component of purchasing a home is paying stamp duty, which is a tax levied on documents when transfer of the title of a property occurs. This fee is usually levied by the state government and thus the charges of stamp duty also vary from state to state. Here are the details:

Gujarat

4.9% of the property's market value, along with an additional 1% registration fee.

Andhra Pradesh

5% for an agreement of sale-cum-GPA and 5% for the sale of immovable property.

Karnataka

For properties less than Rs. 20 lakh, the stamp duty and registration fee is 2% each. Similarly, if the property cost is up to Rs. 45 lakh, the stamp duty rate is 3% and registration fee is 2%. A surcharge of 10% is levied on the stamp duty payment.

Delhi

6% for men, 4% for women, and 5% for joint ownership. A registration charge of 1% of the property value is also applicable.

Maharashtra

In Mumbai, the stamp duty for men is 6%, 5% for women, and the registration charges are 1% of the property value. For Pune, Nagpur, and Navi Mumbai, it is 7% for men and 6% for women.

Rajasthan

8.2% for males, 7% for females, and 8.2% for joint buyers. This includes stamp duty, registration, and additional surcharge fees.

Pondicherry

10% of the property's value, and the registration charge is 0.5%.

Tamil Nadu

7% of the property's market value, while the registration charge is 1%.

Telangana

4% of the property's value, with an additional 0.5% registration charge.

Uttar Pradesh

7% for men and 6% for women owning properties up to Rs. 1 crore. Additionally, a 1% registration fee is also charged.

Gender and age of the property buyer:

Almost all state governments have reduced the cost of senior citizens’ stamp duties. The age of the property owner has a sizable impact on stamp duty rates in most states. When compared to women, men spend around 2% more getting their property registration paperwork stamped.

Type of property purchased:

Stamp duty charges generally differ for residential and commercial properties, with commercial properties often attracting higher rates.

The amenities available:

For example, buildings with amenities like a swimming pool, gymnasium, clubhouse, or sports courts, will incur higher market value than those without them. The higher valuation resulting from the included amenities leads to a higher stamp duty amount.

The property registration fee is the charge you pay to the government for registering the said property under your name. The property registration fee is the additional charge you pay over and above the stamp duty. Unlike the charges for stamp on Home Loans, property registration charges are set by the central government of India, and they are uniform all over the country. You need to pay at least 1% of the property’s value. However, the fees may vary based on the type of property you purchase.

The importance of stamp duty cannot be underestimated. Stamp duty is crucial for a home loan because it provides legal validity for the property transaction and is required by lenders before they disburse the funds. It solidifies the legal ownership of the property for the buyer, which is a necessary step for lenders to protect their investment. Listed below are some points describing its importance:

Legal Compliance

Payment of stamp duty is essential for the legal validity of the loan agreement. Failure to pay stamp duty can render the agreement invalid and may lead to legal consequences.

Property Ownership

Stamp duty payment is a prerequisite for property ownership transfer and ensures that the property transaction is legally recognized by the government.

Revenue Generation

Stamp duty serves as a significant source of revenue for the state government and contributes to public infrastructure development and welfare initiatives.

You may refer to the government’s website or use the stamp duty calculator to estimate the value. You must insert a few basic details, and the tool will compute the exact amount you must pay.

The tax benefits on Home Loan registration and stamp duty charges are covered under Section 80C of the Indian Income Tax Act. You can claim a benefit of up to Rs. 1.5 lakh while filing your income tax returns. Apart from this tax benefit, you can claim tax deduction on the repayment of your Home Loan interest under Section 80EE of the IT Act.

If you purchase a home with a co-owner, and both of you take a Joint Home Loan, you can claim tax benefits individually. You should also go through the Home Loan agreement for stamp duty charges to understand it clearly.

With Niwas HFC's easy application process and supportive Loan advisors, buying your first home or upgrading to a new one becomes a stress-free experience. We understand that buying a home is a life-changing decision, and our goal is to make it financially achievable for everyone.