A stamp duty is a kind of tax that is levied on the transactions concluded by way of documentation or instruments. The tax was sealed by the Bombay Stamp Act (1958).
As per the regulations of this Act, the buyer must pay a 5% stamp duty on the cost of the flat or office unit. This payment is a pre requisite for the full ownership of property and the consequences for evasion of stamp duty can even lead to imprisonment.
Once the buyer decides to purchase a residential property or for that instance a commercial unit, the stamp duty is calculated according to the agreement value or the market value, whichever is higher The investor will then need to obtain a pay-order, or deposit/transfer the said sums to the account as designated by the Government from time to time after the agreement becomes capable of execution.
What is the extent of application of the Bombay Stamp Act, 1958?
The process of registration involves the submission of executed documents to the required governmental officer for taking the same into their records. Once the stamp duty has been paid on a document, it has to be registered under the Indian Registration Act (1908) with the Sub-Registrar of Assurances of the jurisdiction of the property. Unless this procedure is completed, the purchaser does not have full ownership of the property.
The original document is scanned at the Sub-Registrar of Assurances and preserved. The procedure also includes a registration fee payment of not more than Rs. 30,000, which is fixed at 1% of the market value or the agreement value, whichever is higher. Once again the value is subject to change. The procedure can only be completed under the presence of two eye-witnesses. When a receipt with a distinct serial number is issued, the procedure is complete.
What is an "instrument" under the Act?
The Act applies to the whole of the State of Maharashtra.
What is market value?
An "instrument" includes every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded, but does not include a Bill of Exchange, cheque, Promissory Note, Bill of Lading, Letter of Credit, Policy of Insurance, Transfer of Share, debenture, proxy and receipt.
When is stamp duty payable on an instrument in Maharashtra?
Market value in relation to any property which is the subject matter of an instrument means the price which such property would have fetched if sold in the open market on the date of execution of such instrument or the consideration mentioned in the instrument, whichever is higher. The price which such property would have fetched, if sold in the open market, is determined on the basis of the Ready Reckoned issued each year. Depreciation in stamp duty is available for old buildings and building without lift and premium is added on those properties with premium amenities.
What is the rate at which stamp duty is payable?
All instruments are liable to be stamped before or at the time of execution of instrument or immediately thereafter on the next working day following the date of execution, when executed in the State of Maharashtra. Any instrument executed outside the state is liable to duty only on receipt of such instrument in the state, provided it relates to a property situated in the state, or a matter or thing to be done in the state. Stamp duty is not levied on a transaction, but on an instrument.
Which documents are required to be compulsorily registered?
Stamp duty is payable at the rate mentioned in the Bombay Stamp Act, 1958 and as amended from time to time.
Is there a time limit within which documents should be registered?
Documents listed in Section 17 of the Indian Registration Act, 1908 are to be registered compulsorily. Registration of documents listed in Section 18 of the Indian Registration Act, 1908 is optional. An agreement for leave and license is required to be compulsorily registered under the Maharashtra Rent Control Act, 1999.
Who is required to pay stamp duty and registration fee on purchase or lease of a flat or office?
Yes. Documents should be executed within 6 months from date of payment of Stamp Duty. After lapse of timelines for registration, documents can still be registered within the next 4 months on payment of penalty.
Is there a restriction on the name in which stamp paper must be purchased?
A purchaser (whether on first sale from a developer or on resale of a flat) or a lessee of a flat or office is required to pay stamp duty and registration fee.
Is there a time frame within which the stamp paper must be used?
Yes. The stamp paper should be purchased in the name of any one party executing the document.
Is there a penalty for not paying the requisite stamp duty?
Yes. Stamp paper should be used within 6 months from date of purchase. Stamp papers not used within this period are invalid.
What are the consequences for not paying stamp duty on an instrument?
Yes. Previously, the penalty was an amount not exceeding 10 times the amount of the proper duty. As per the recent amendments, a penalty of 2% per month on the proper duty for the period of default will be levied, subject to a maximum of 2 times the deficient portion of duty. Instruments are liable to be impounded till proper stamp duty is paid.
Is it possible to get a refund of stamp duty already paid on an instrument?
In case proper stamp duty is not paid on an instrument, the instrument is inadmissible as evidence and cannot stand the test of times in any court of law.
Is there a procedure for adjudication of stamp duty?
Yes. If stamp duty is paid on an instrument but the instrument is not signed by any party then an application is to be made within 6 months of the date of purchase of the stamp paper, to the concerned authorities for refund of stamp duty. The original stamp paper is returned along with the application. On receipt of such application, the concerned authorities are empowered to refund the value of stamp duty after deducting such amounts as may be prescribed.
Can a person grant a power of attorney for signing and registering instrument?
A person can seek the opinion of the Collector of Stamps by making an application to him for adjudication of stamp duty payable by such person on the instrument. For this purpose, the person who is a party to the instrument has to furnish a true copy of the instrument and an affidavit stating the facts and such other evidences as required, along with prescribed fee. The Collector's opinion is final and conclusive. No appeal lies against his order of adjudication.
Can a person grant a power of attorney for registering instruments?
Yes. Persons residing abroad or those who travel frequently are advised to grant power of attorneys to facilitate better management of their flats.
Yes, but his power of attorney must be registered before the Sub Registrar of Assurances.
These are the broad guidelines meant for ready reference with respect to acquisition and transfer of immovable property in India and in each case prospective buyer or seller of property in India must consult his/her own legal/finance/tax advisor and obtain suitable advise for their specific transaction. Narang Realty assumes no responsibility or legal liability for transactions entered into by placing reliance on these guidelines. Further, Narang Realty assumes no responsibility for updating these Guidelines.