What is Stamp Duty? How to Calculate Stamp Duty in Just a Few Steps?

What is Stamp Duty? How to Calculate Stamp Duty in Just a Few Steps?

14 January 2023

Under Section 3 of the Indian Stamp Duty Act, 1899, stamp duty and registration fees are the two major expenses when the sale deed of the property is processed. To calculate the exact expenses beforehand, borrowers can use a stamp duty calculator and apply for the home loan accordingly.

An overview of stamp duty

As per the Indian Stamp Duty Act, 1899, stamp duty is an indirect tax levied by the Government over all authorised and valid property transactions. This tax is imposed on any immovable property having a value of more than Rs.100 that is authorised. These are additional costs that all home buyers in the country have to pay to become the legal owner of the property. 

Since stamp duty rates are quite high in the Indian states, sellers and buyers often try to evade the stamp duty charges. Stamp duty charges are imposed by states and therefore differ from one state to another. Within the Indian states, stamp duty charges differ between the ranges of 3%-10% of the property’s worth across states.

However, no stamp duty and registration charges are included when applying for a home loan in India sanctioned by financial institutions. In this regard, one can opt for separate loans to pay such charges.

How to calculate stamp duty charges? 

Here are some simple steps to calculate stamp duty charges by using this online tool:

Step 1: Visit the official website of your chosen lender and seek stamp duty calculator on the home page

Step 2: Select the state and property’s market value

Step 3: After feeding in the details, click on ‘submit’

Within a few seconds, the stamp duty calculator will display the exact amount to be paid as stamp duty charges, and borrowers can apply for a home loan accordingly.

Stamp duty in India is charged based on the market value/property’s consideration value/ready reckoner rate/ or circle rate of the property, whichever is on the higher side. Here, the considered property value refers to the overall amount involved during the agreement of sale/purchase of a property between two parties. 

For instance, if the property’s agreement value is Rs.50 lakh and value per ready reckoner rate is Rs.40 lakh, the stamp duty would be evaluated on the basis of the higher value, which is Rs.50 lakh.

Usually, the cost of stamp duty ranges between 5%-7% of the property’s market worth. To avoid any fund shortage when purchasing a home or registering the property, ensure calculating these charges when applying for the home loan.

Nonetheless, to calculate these charges without any hassle, borrowers can take help of a stamp duty calculator that is exclusively designed to accurately evaluate the amount to be paid as stamp duty charges. 

Factors to consider when calculating stamp duty charges

The percentage of stamp duty charges relies on various factors, and they are:

  • Property’s location

Stamp duty charges are different for properties falling under municipal boundaries of the city when compared to properties falling outside these limits. When considering the former, charges are always higher.

  • Property’s usage

Irrespective of property’s usage, commercial or residential, stamp duty charges for commercial properties will always be higher than residential buildings.

  • Owner’s age and gender

Discounts are available for senior citizens in some states. Moreover, some states offer concessions for female property owners.

  • Property type and project amenities

The property type; i.e., an independent house or a flat, is considered when calculating stamp duty charges. Besides, states like Uttar Pradesh impose additional stamp duty if the housing project provides high-end amenities, such as community halls, elevators, club houses, gyms, etc.

Note that stamp duty charges include tax benefits under Section 80 (C) of the Income Tax Act, up to a limit of Rs.1.5 lakh. Apart from these charges, borrowers must not forget to check home loan foreclosure charges when proceeding with the loan. Such charges significantly increase the borrowing amount, thereby creating a financial burden for the borrowers.

On the other hand, existing borrowers can avail of pre-approved offers on a wide range of financing options, such as home loans, loans against property, etc. Availing of these offers will allow borrowers to avoid the hassle of lengthy documentation and save time. Therefore, borrowers need to enter their names and contact information to check the pre-approved offers.

To summarise, when purchasing a house, borrowers can prevent financial losses by paying the stamp duty charges.  However, calculating them beforehand with the help of a stamp duty calculator will help individuals compute the total fund required to buy a home. The Indian Government publishes these rates every year for fair payment of stamp duty value.

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