Homeownership comes with responsibilities. The homeowner must ensure that they are doing everything to facilitate a quick, smooth, and lawful transition of the home they are buying into their name. Stamp duty and registration charges are important legal charges that one must pay while buying a home.
The registration charges go to the central government of the country and the central government uses the money charged under this banner to create and maintain paperwork that establishes the legal transfer of ownership from seller to buyer. The stamp duty, which is a type of tax that the state government applies to the final sale agreement, on the other hand, goes to the state government. The stamp duty certificate serves as proof that the transaction happened and that the ownership of the property was transferred to its current lender.
To sum up, while the registration charges safeguard the property buyer’s ownership right by establishing them as the owner of the property, the stamp duty certificates provide acknowledgement of the transaction that led to the concerned property being transferred from its old owner to its current owner. In this article, we talk about stamp duty, the factors that affect it, and the importance of the stamp duty calculator in the home loan process.
Stamp Duty and the Factors that Affect It
Under the Indian Stamp Act, of 1899, the government charges stamp duty, which is a legal tax, on property transactions. Paying stamp duty is important as it legalizes transactions. In case of a property dispute, the registration charge and stamp duty certificate serve as proof of ownership. However, stamp duty varies from state to state as well based on a variety of factors. Let us look at the factors that affect the stamp duty charges.
1. Property Type: In general, residential properties attract lower stamp duty than commercial properties. This can be attributed to the fact that commercial properties are more expensive than residential properties.
2. Location of the Property: The stamp duty also varies based on the location of the property as well as the amenities available. Properties located in urban areas and having all modern amenities, such as a gym, swimming pool, play area, etc., attract a higher stamp duty than properties located in rural areas.
3. Gender of the Property Owner: Most state governments offer rebates to female property owners. Thus, properties owned by women or properties with at least one female co-owner attract lower stamp duty than a property having all male owners.
4. Age of the Property and Age of the Buyer: Old properties attract a lower stamp duty than new properties as new properties are usually priced higher than old properties. Further, all states also offer rebates to senior citizens. Older people generally have to pay lower stamp duty than young people.
How is Stamp Duty Calculated?
One of the most common mistakes that all homebuyers make is forgetting to add up the additional but important costs associated with buying a home. For instance, most people do not take into consideration stamp duty and registration charges while calculating the ideal home loan amount for them. Stamp duty and registration charges turn out to be a hefty amount and must be taken into consideration while planning for a home loan. Stamp duty can be calculated using the following formula:
Stamp Duty = Property Value × Stamp Duty Rate
This formula looks fairly simple and calculating stamp duty using this formula seems easy but there are a few considerations that one must keep in mind.
1. First, the property value can be calculated only when one knows the circle rate.
2. Stamp duty is calculated on the higher value between the circle rate and the agreement value and applied to the higher amount.
Calculating stamp duty may look easy, but in truth, it is not. A stamp duty calculator can make life a lot easier by making calculations a lot less complex.
Stamp Duty Calculator: What You Need to Know
The stamp duty calculator is an easy-to-use tool that lets property buyers calculate the stamp duty they will need to pay on their property transaction. The calculator is free to use and it requires borrowers to enter only two details: the state in which the property is located and the value of the property. Based on these two values, the calculator calculates the stamp duty payable, thereby allowing home loan borrowers to better decide the ideal home loan amount for them.
Other than the stamp duty calculator, homebuyers must also use other online tools, such as the home loan EMI calculator and the home loan eligibility calculator, to plan their home loan repayment journey and secure a loan at the best possible home loan interest rate.