6 Safe & Legal Ways To Reduce Stamp Duty When Buying A Home
Stamp Duty When Buying A Home : The reduction of stamp duty on real estate purchases in India is legal and is covered in this guide.
Indian homebuyers are required to pay stamp duty when registering their property. Stamp duty significantly raises a homebuyer’s financial burden by adding close to 3-8% of the transaction value (exact rates vary by state of residence). There are, however, legal and secure ways to pay less stamp duty when buying real estate in India.
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Get a woman’s name added to the registration.
With a few notable exceptions, almost all Indian states provide discounts to female homebuyers. For instance, women buyers in the national capital Delhi must pay only 4% stamp duty as opposed to 6% for male buyers. To take advantage of this benefit. You might think about registering the property in the name of a female resident of the home.
Even though the discount might be less in this situation. It is still possible to take advantage of this discount if the property is being co-registered in the name of a woman.
Be cautious: Buying property is a very personal and complicated process. Choose this option only if you are absolutely certain that you won’t face any legal issues related to title ownership and/or misuse.
Using the circle rate, pay the stamp duty.
The government-set value below which you cannot register your property is known as the “circle rate.” The benchmark used to determine stamp duty is this. You might think about registering your property based on its circle rate value since it occasionally might be less than the market value of the property.
Assume that you paid Rs 1 crore for your property because the local market price is higher than the government-mandated circle rate. The cost of the property comes to just Rs 80 lakh when calculated using the circle rate value. As a result, registering the property on the circle rate value is safe from legal risk. If this property is in Delhi, the stamp duty for a woman buyer would be Rs. 3.20 lakh (4% of the property value). She would have to pay Rs. 4 lakh to register the property at its Rs. 1 crore purchase price.
Be careful because registering property on a circle rate also reduces the property’s value on paper. This implies that you might not be able to demand, say. Rs 1.20 crore for a property registered at Rs 80 lakh a few years ago if you sell this property in the future. Additionally, doing so would result in a higher capital gains tax rate.
Stamp Duty When Buying A Home : Appeal for the determination of market rate
The property’s market value may occasionally be less than its circle value. The law only requires you to pay stamp duty on circle rates. So you might be required to pay more for a property with a lower value. There is, however, a solution to this predicament.
In the event that the market value of a property is less than circle rates. Buyers are free to file an appeal with the sub-registrar pursuant to Section 47 of the Indian Stamps Act.
“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 to it and, upon cancelling the same in the manner previously provided, may pay the sum payable upon such bill [or note] and may 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, so
Warning: The property will continue to be unregistered while your appeal is pending. If the sub-registrar is unconvinced, you might also have to pay the old stamp duty.
Register a property that is still being built at a lower undivided share.
A buyer of a property that is still being built must pay stamp duty based on the cost of the building as well as his undivided share of the land that the building will be built on.
For instance, buyers of properties that are still under construction in Tamil Nadu and Karnataka must pay the stamp duty in two instalments. First, the buyer’s undivided share of the property is registered in his name (UDS). Consequently, a lower UDS would indicate lower stamp duty. The property is registered a second time after project completion, calculating stamp duty based on the entire property value.
Attention: If you were to sell this property, doing so would result in a financial loss. This could cause a permanent depreciation to your property.
Stamp Duty When Buying A Home : Examine the local stamp duty regulations.
A buyer conducts extensive research before making a purchase. Because there are state-specific benefits that can be obtained at the time of property registration. zt may be a good idea to study the local stamp duty law.
For instance, in Uttar Pradesh, the stamp duty on property transfers involving a family is now limited to Rs 7,000 (Rs 6,000 for the stamp duty plus Rs 1,000 for processing fees). In Maharashtra, property transfers within a family only incur a Rs 200 stamp duty fee. Despite the fact that the government is currently reviewing this rule in an effort to raise revenue.
Precaution: Typically, such rules may focus more on gifts and wills than actual transactions.
Stamp Duty When Buying A Home : Take advantage of tax breaks on stamp duty
At the time of discharging your income tax obligations, you can save money. A buyer may deduct Rs 1.50 lakh from the cost of stamp duty and registration fees on property purchases under Section 80C of the Income Tax Act. Joint owners may each claim this deduction according to their respective ownership interests in the property.
Attention: Only people and HUFs may deduct this amount. Only the year that the stamp duty and registration fees were paid is eligible for this deduction. For instance. If you acquired the property and registered it on October 20, 2022, you can deduct it in FY 2023. (April 2022 to March 2023 ).
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