India’s Stamp Duty and Property Exchange Tax

Property purchases and sales come with a number of tax duties that both parties must fulfil; otherwise, such transactions may be illegal. A transaction is described to as a “exchange” under section 118 of the Transfer of Property Act, 1882, when two parties swap ownership of one item for another, whether one of the goods is only money or both. Upon completion of the exchange, only the procedure stipulated for the sale of such property may be utilised to transfer property.

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An exchange occurs when two people exchange possession of one object for another without either or both of the transferred goods holding any currency. Through this transaction, each party receives property in which it had no prior stake. Each party to the exchange has the rights and is subject to the obligations of the buyer with regard to what he purchases and the rights and obligations of the seller with regard to what he gives. The property must be physically deliver to the parties in order for the exchange to be deem legal.


Principles of Property Exchange

Two or more parties, each of whom owns one of a minimum of two properties;

These properties must be exchange in a reciprocal manner; meaning that A must transfer his property to B and B must transfer his property to A. Property can be either moveable or immovable, or both.

These traits alone should be taken into consideration. An exchange occurs when two people swap possessions of one thing for another without either or both of the transferred goods carrying any currency. Through this transaction, each party receives properties in which they had no prior stake.


Mutual Comprehension and Collaboration

According to the definition of the word “mutually,” there must be a two-item trade and both parties must be the same. As an illustration, suppose A sells his property to B, who then sells it as collateral for A. If the transfer is made by one side, it is not swap. Due to the fact that the wife does not relinquish ownership of anything, a transfer from a spouse to a wife is not considered a trade for the purposes of the discharge of her support claim. Similar to the preceding example, an exchange happens when two items are offset against one another and new property is acquired to make up the difference rather than when two objects are actually traded.


A Property Exchange Contract: What Exactly Is It?

An agreement between two parties to exchange certain assets is refer to as a property exchange agreement. Transferring asset ownership is made simpler with the use of a property exchange agreement.

This kind of contract can be use to transfer any asset, including real estate, intellectual property, stocks, or bonds. Property exchange agreements are widely used in business transactions, but they can also be used in private transactions.


Taxes on property exchanges and stamp duty

When purchasing a property, the selling consideration is often paid in cash. However, cash is not always necessary as part of the payment for the acquisition of property. You might choose to move to a bigger and smaller location depending on how much space you require and other considerations, such as cost. Exchange of one property for another is permit by the law controlling property. It is not always necessary to move from one residential area to another. You can also exchange a piece of land, an unfinished building, a commercial property, or a residential property for another one used for your business. If the two assets have different valuations, a monetary payment can be used to reconcile the difference.


Knowing what Stamp Duty is

The tax can be recover by the government by adding a stamp duty. A party is require to pay this stamp duty or tax when registering any document as the legitimate owner of a piece of property that is ultimately Indian land. The “party fee,” which covers paying the specialist who completes these tasks, is the price associate with updating official records.

The amount of stamp duty you must pay can vary depending on the location of the land, building, apartment, or any other immovable property, as well as the state in which the property is located. The property with the higher market value is assume to be the one with the stamp duty value. In the case of any real property gifted to a family member. Stamp duty is calculate as 3% of the property exchange value. The stamp duty is five percent if a person other than a family member transfers the property. The stamp duty charge is apply to a wide range of transactions, including conveyancing deeds, sales deeds, and powers of attorney.

Only the property-related paperwork is available for pickup after stamp duty has been paid. Stamp duty varies depending on the type and assess value of the property because it is determine as a percentage of the purchase price. The quantity collect and the current circle rate are further compare. Base on the higher value, stamp duty’s total cost is calculate.


The effects of stamp duty on property exchange

It’s important to initiate a sale deed or sale agreement exchange when selling a property and it must be mark with the rate that relates to the property’s market value.

A property exchange, however, requires an exchange document because it differs significantly from a sale transaction. A second choice is to begin two separate sale deeds, but in that case. Stamp duty would need to be paid on both contracts due to the fact that every state has its own set of laws; it is essential to ensure that you are according to those regulations. The properties with greater market values are deem to have a higher value for the purposes of stamp duty on property exchange. For instance, stamp duty will be owe on the market value of the larger unit if you exchange your smaller flat for it within the same building.

In order for the stamp duty to be paid, the two parties must agree on its cost. If the parties to a sale document are unable to come to an agreement. Stamp duty must be paid by the buyer. In contrast, a property exchange or transfer act requires that the disagreement be resolve peacefully between the parties.


stamp duty on property exchange

In accordance with Section 54 of the exchange under the Transfer of Property Act. The exchange deed purports to transfer immovable property rights and must be document with the offices of the registrar of assurance.

Exchanges of real estate are subject to income tax. If the property is trade for a longer period of time than 24 months. Any gain or loss will be regard as long-term. Similar to this, if the duration is less than 24 months. Any profit or loss made during the exchange’s acquisition of property under the Transfer of Act will be treat as short-term. When preparing the exchange document, it’s feasible that neither party added any value to the property beyond the price difference. You can compute capital gains in these cases by knowing your property’s market worth as established by stamp duty & comparing it to the amount it cost when you first bought it.


The Basics of a Property Deed Exchange

Property owners create a deed of exchange when they want to exchange ownership of their property for another party to take possession. Such transfer shall be made by a deed of exchange. Parties can trade moveable property, money, and other assets by signing a deed of exchange. If one side exchanges money for something that is not money. The transaction is not an exchange and is instead a sale.


What Happens During a Property Deed Exchange?

Following is note in a property deed exchange:

  • The exchange’s date
  • Names & addresses of the individuals involved in the property swap.
  • Details about the property, such as its address, surrounds, and other information.
  • An exchange is a statement that refers to a real estate transaction.
  • The parties’ and the witnesses’ signatures are provided.
  • The stamp duty or registration fee will be assess during the property exchange.


Registering for a property exchange deed in Delhi

The following procedures can be utilize to submit an online application for a property exchange deed in Delhi:

  1. On the Delhi Online Registration Information System website, click “Deed Writer.”
  2. Choose the exchange property option from the drop-down list.
  3. The computation and display on your screen of the relevant stamp duty for the transaction.
  4. Use the Stock Holding Corporation of India website to pay the stamp duty.
  5. Download the payment receipt after completing your transaction.


After your payment has been approve. You must arrange a meeting with the sub registrar of the revenue department. Follow these guidelines to accomplish this:

  • Visit the Delhi Revenue Department’s website.
  • Decide on the names of your SRO, neighbourhood, and district.
  • You must fill out the stamp number on your payment receipt.
  • Decide on an appointment time and day that work for you.
  • After the procedure is finish, you’ll receive an SMS notification confirming your appointment.

This is how the registration process for property exchange deeds in Delhi is carried out.


The effects of a property exchange on income taxes

Act notes further state that immovable property swaps give rise to income tax difficulties. Any gain or loss realize on the sale of real estate after holding it for more than 24 months is regard as long-term. If the property is exchange fewer than 24 months after its purchase, the gain or loss will be momentary. There may also be exchanges in which the value of the object is specified in the exchange deed but no value is assign by either side. In these situations, you must assess the market value of your property based on the stamp duty ready reckoner & compare it to the price you paid in order to determine any capital gains on property exchange.

Under Section 54, a residential property exchange is eligible for the exemption. The owner of the lower value apartment who is exchanging it for a higher value one won’t be subject to any tax obligations. If you purchase the smaller apartment and its market value is at least equal to the index long-term profits determined above on the larger apartment, the smaller apartment will not be tax. The market price might, however, be lower than the indexed long-term capital gains. The distinction between the sale and exchange under the Transfer of Property Act in this instance is that the consideration in a sale is the price that has been paid, promise to be paid, or is partially paid; the consideration in an exchange is the transfer of one asset in exchange for another.



It is abundantly clear from the discussion above that using an exchange deed to swap one property for another may save on stamp duty even though doing so does not result in a specific tax gain.

Stamp duty and other taxes associated with property exchange are well understood after the information provide above. While using an exchange deed can save stamp duty. Exchanging one property for another does not result in any special tax advantages. In a money exchange, each participant attests to the legitimacy of the funds he has provided. Exchangeable currency includes bills of the same denomination, bills of different denominations, and foreign currencies. Coins and banknotes are both consider money in this context.





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