6 Legal Ways To Reduce Stamp Duty On Property Purchases
There are legal ways to reduce stamp duty on property purchases in India, which is covered in this guide.
Home buyers in India must pay stamp duty at the time of property registration. Stamp duty, which amounts to approximately 3-8% of the transaction value (exact rates vary by state of residence), significantly increases a homebuyer’s monetary burden. However, there are legal ways to reduce stamp duty on property purchases in India.
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Register it in the name of a woman.
With a few exceptions, nearly all Indian states provide discounts to female homebuyers. In the national capital of Delhi, for example, women buyers must pay only 4% stamp duty, compared to 6% for male buyers. To take advantage of this benefit, you should consider registering the property in the name of a woman living in the house.
This discount is also available if the property is co-registered in the name of a woman, though the discount may be lower in this case.
Caution: Purchasing property is a highly personal and complex process. Choose this option only if you are absolutely certain and do not anticipate any legal issues regarding title ownership and its misuse.
Pay stamp duty at the circle rate.
The government-determine value below which you cannot register your property is known as the circle rate. This is the standard against which the stamp duty is calculate. Because the circle rate may be lower than the market rate in some cases. You may want to consider registering your property based on its circle rate value.
Assume your property costs Rs 1 crore because the market rate in the neighbourhood is higher than the government-mandated circle rate. The cost of the property is only Rs 80 lakh when calculated using the circle rate value. As a result, registering the property on circle rate value is legal. If this property is in Delhi. A female buyer would pay Rs 3.20 lakh (4% of the property value) in stamp duty. She would have to pay Rs 4 lakh to register the property with a purchase value of Rs 1 crore.
Caution: Registering your property on a circle rate reduces the value of your property on paper. This means that if you sell this property in the future. You might not be able to get Rs 1.20 crore for a property that was registered for Rs 80 lakh a few years ago. Furthermore, doing so would result in a higher capital gains tax application.
Market rate determination appeal
The market value of the property may be lower than the circle value at times. However, because the law requires you to pay stamp duty only on circle rates. You may be force to pay more stamp duty for a lower-valued property. There is, however, a way out of this situation.
Section 47 of the Indian Stamps Act gives buyers the right to file an appeal with the sub-registrar to have circle rates reviewed if the market value of a property is less than circle rates.
“When any bill of exchange or promissory note chargeable is presented for payment unstamped, the person to whom it is so presented (sub-registrar) may affix the necessary adhesive stamp thereto and, after cancelling the same in the manner hereinbefore provided, may pay the sum payable upon such bill [or note] and charge the duty against the person who ought to have paid the same or deduct it from the sum payable, as aforesaid, and such bill [or note] shall,
Caution: The property will remain unregistered while you file your appeal. If the sub-registrar is not convince, you may be required to pay the old stamp duty as well.
Under-construction property should be registere at a lower undivided share.
A buyer pays stamp duty on an under-construction property based on the construction cost and his undivided share of the land on which the structure stands.
Buyers of under-construction properties in Karnataka and Tamil Nadu, for example, pay the stamp duty in two instalments. First, the buyer’s undivided share of the property is registere in his name (UDS). Lowering the UDS would imply lower stamp duty.
Caution: Doing so will result in a financial loss if you sell this property. You may be causing permanent depreciation to your property.
Reduce Stamp Duty : Examine the local stamp duty laws.
A buyer conducts extensive research for future purchases. Studying the local stamp duty law may be a good idea because there are state-specific benefits that can be obtaine when registering a property.
In Uttar Pradesh, for example. The stamp duty on a family property transfer has been set at Rs 7,000 (Rs 6,000 as stamp duty + Rs 1,000 for processing fees). In Maharashtra, property transfers within a family attract only Rs 200 stamp duty. Despite the fact that the government is re-evaluating this provision in order to increase revenue collection.
Caution: Such rules are often more gift- and will-centric than transaction-centric.
In Uttar Pradesh, for example. The stamp duty on a family property transfer has been set at Rs 7,000 (Rs 6,000 as stamp duty + Rs 1,000 for processing fees). In Maharashtra, property transfers within a family attract only Rs 200 stamp duty. Despite the fact that the government is re-evaluating this provision in order to increase revenue collection.
Caution: Such rules are often more gift- and will-centric than transaction-centric.
Take advantage of stamp duty tax breaks.
You can save money when your income tax liability is discharge. A buyer can claim a Rs 1.50 lakh deduction for stamp duty and registration charges paid on property purchases under Section 80C of the Income Tax Act. In the case of joint owners, each can claim this deduction based on his or her share of the property.
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