Stamp Duty under Bombay HC rules cannot be levied on past transactions.
In a recent ruling, 4 bhk flat for rent in kharghar, the Bombay HC ruled that the authorities cannot collect stamp duty on previously stamped ownership documents at the time of the next sale. We are studying the impact of this decision
Updated August 25, 2020: In an effort to improve home sales during the coronavirus pandemic, the Maharashtra government decided on August 26, 2020 to reduce the current stamp duty by 5%. 2% property registrations by December 31, 2020 After this period, buyers will pay 3% stamp duty on property registrations between January 1 and March 31, 2021.
The decline has helped city builders increase sales for the current holiday season. On October 14, 2020, Secretary of Housing and Urban Affairs Durga Shanker Mishra also urged other states to follow Maharashtra’s lead and lower stamp duties to increase demand in India’s highest real estate sector. big industry that creates jobs in India after agriculture.
“We have also written to all states. I am also monitoring various key secretaries and secretaries of state to see if they can come up with an initiative that will help cut costs, ”Mishra said.
According to Rajan Bandelkar, president of NAREDCO-west and organizer of HousingForAll.com, this unprecedented move by the state government will bring a new wave of short-term home purchases and positively change the dynamics of supply and demand. request.
Update March 6, 2020: The state government of Maharashtra, when submitting the budget for fiscal year 2020-2021 on March 6, 2020, proposed a 1% reduction in stamp duty on property purchases. The reduced rates will be applied in areas managed by MMRDA (Mumbai Metropolitan Area Development Authority) and municipal corporations in Pune, Pimpri-Chinchwad and Nagpur for two years. Currently, Mumbai homebuyers pay a 6% stamp duty on property purchases, not including the 1% registration fee. In Pune, the stamp duty is currently 6%.
March 12, 2019 Update: On March 1, 2019, the Maharashtra government announced an amnesty program for penalties that may be imposed for insufficient payment of past stamp duty. The regime proposes to limit the penalty payable for certain transactions to 10% of the stamp duty on the deficit instead of the 400% that the government will normally impose.
The scheme applies to all transactions relating to the sale or transferrental rights for residential buildings in Maharashtra and are only available for documents signed before December 31, 2018.
The request, together with the document and supporting documents, must be submitted within six months from 1 March 2019, i.e. until 31 August 2019, until which the system will remain open.
Many years ago, when property prices weren’t that high and stamp duty wasn’t the main source of revenue for the state government, there were no clear guidelines for stamp duty when selling apartments in Maharashtra. .
However, as property prices have skyrocketed, state governments have realized that stamp duty on the sale / transfer of apartments could generate significant treasury revenue. Therefore, the government established the amount of stamp duty paid on the transfer of real estate.
How the stamp duty is calculated
Prior to July 4, 1980, stamp duty had to be paid on a notional basis. However, due to the rampant use of black money in real estate transactions, the value of the transaction was extremely low, which deprived the state government of its legal fees.
To overcome this threat, the Maharashtra government introduced the concept of market value stamp duty on July 4, 1980 to increase revenue and close the loss of revenue. On March 1, 1990, the state government of Maharashtra introduced a “loan calculator” to help buyers find out the value of stamp duty on property purchases if the agreed value is less than the appraised value. Stamp duty.
For properties acquired prior to July 4, 1980, for which the applicable stamp duty had not been paid at that time, the stamp duty applied a differential stamp duty with a penalty in relation to past transactions in that property , when ownership is transferred and registered. government bodies of Maharashtra. This promotion caused a lot of stress and cost the current buyers of this property a lot of money.
Recently, the Bombay High Court had the opportunity to rule on the matter and ruled that the imposition of stamp duties on transactions made during a subsequent sale was inappropriate. This step will bring relief to buyers of old resale properties.
Collecting stamp duty on past transactions: a summary of the case
A woman named Lajwanti Randhava inherited from her father, along with other legal heirs, an elegant 3,300-square-foot apartment in the Tahnee Heights Cooperative Housing Society on Napean Sea Road in Mumbai.
This apartment was purchased in 1979, and at that time the deal was formalized on stamp paper for 10 rupees. At that time, a sales contract could be signed on stamped paper for five rupees. This agreement was also not registered.
This apartment was auctioned for Rs 38 crore in 2018. When the buyer, Vijay Jindal, applied to the registry office to register the documents, the stamp collector refused to register a new one. contract. from auction and demanded the payment of stamp duty on the chord chain, claiming that it had been incorrectly stamped.
The stamp duty alone was around Rs. Rs. 2 crores based on current rates. Since the property was purchased at an auction from a liquidator, the buyer applied to the High Court of Bombay to ask the sellers to take responsibility for paying the past stamp duty. one of the sellers who refused to do so. Incur expenses.
HC Bombay’s decision to apply stamp duty retroactively to past transactions
To settle the dispute, Judge Gautam Patel took a starting position and concluded that the stamp authorities had no right to collect stamp duty on previously insufficiently stamped documents on any property at the time of registration. its subsequent sale. Patel noted that stamp duty is payable on a bill of exchange and not on a transaction, in accordance with the provisions of the Indian Revenue Stamps Act.
He added that stamp duty cannot be refunded at the current rate, compared to earlier documents that were executed at a time when the instrument was not subject to stamp duty, as these documents could not be processed. as “unsigned” or “incorrectly stamped” at the appropriate time.
He also noted that, in the absence of clear provisions on retroactive stamp duty, stamp duty authorities cannot insist on payment of stamp duty on earlier documents that are part of a document chain.
The Court also noted that even if a bill of exchange was subject to stamp duty, the rate at which the document in question would be stamped would apply, and in no case could it be expected to be stamped at the rate of stamp duty. currents.
This buyer is not required to payy stamp duty on past transactions
This decision clarified and will help buyers of older apartments for which the relevant stamp duty has not been paid in the past. This will benefit hundreds of thousands of apartment buyers when purchasing older properties as there are many properties that were not paid for at the time of purchase.
If you read the ordinance carefully, you will find that even if the old instrument was issued when stamp duty was paid but not paid, the current buyer cannot be burned with the additional tax value. … stamp duty, for old contracts “without a seal” or “with an incorrect seal”.
This decision also states that the debt on stamp duty, even if paid without fail, must be paid at the rate in force at the time of the signing of the old document, and not at the rates in force at the time of its subsequent sale.
Thus, in fact, the stamp duty authorities cannot refuse to register a contract for real estate acquired now at the resale stage, even in cases where the previous instrument / contract was not registered or was incorrectly or incorrectly registered. insufficiently buffered. in accordance with the current rate.
Is there a stamp duty applied on apartment resale?
Stamp duty payments have nothing to do with the condition of the building or the phase of ownership. This means that buyers will have to pay stamp duty when registering the property, whether it is property under construction, ready to transfer or resale, or old property.
Assistance in buying a secondary property is provided in the form of a goods and services tax. Buyers investing in resale homes do not have to pay GST on the transaction. This does not apply to houses under construction. To understand the type of property, buyers need to pay GST in the range of 1% (budget housing) to 5% (non-budget segments).
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