Stamp Duty

What is stamp duty?
It is a tax, similar to income tax, collected by the government. Stamp duty is payable under Section 3 of the Indian Stamp Act, 1899. Stamp Duty must be paid in full and on time. If there is a delay in payment of stamp duty, it attracts penalty. A stamp duty paid instrument / document is considered a proper and legal instrument / document and has evidentiary value and is admitted as evidence in courts. Document not properly stamped, is not admitted as evidence by the court.

When is the stamp duty payable?
It is payable before execution of the document or on the day of execution of document or on the next working day of executing such a document. Execution of the document means putting signature on the instrument by the person’s party to the document.

What is the penalty charge?
Any delay in duty payment will pull in 2% per month to the maximum of 200% of the deficit amount of stamp duty. Stamp papers are to be purchased in the name of either of the parties, i.e, seller or buyer involved in the agreement, failing which will disable the stamp paper. It is said to be valid for six months from the date of purchase, only if the duty is paid on time.

Who is liable to pay?
In the absence of any agreement to the contrary, the purchaser/transferee has to pay stamp duty or in case of exchange of properties, both parties have to bear stamp duty equally.

How should one sign an instrument affixed with adhesive stamp?
According to the provisions of Section 12, any person executing an instrument—affixed with adhesive stamp—shall cancel the adhesive stamp by writing on or across the stamp his name or initials. If such an adhesive stamp has not been cancelled in the aforesaid manner, such a stamp is deemed to be unstamped.

What is instrument?
Instrument means any document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded. It is payable on instruments and not on transactions. Stamp duty should be charged on the basis of the contents of the instrument only. If any information essential for working out stamp duty is missing in the instrument, valuation officer can call for it. Information such as the area of the flat, number of the floors and year of construction must be mentioned in the agreement for quicker response.

How should instruments stamped with impressed stamp be written?
As per the provision of Section 13 of the Indian Stamp Act, 1899, any instrument on an impressed stamp, shall be written in such manner that the stamp may appear on the face of the instrument and cannot be used for or applied to any other instrument i.e., cancel the adhesive stamp so affixed by writing on or across the stamp his name or initials. If such an adhesive stamp has not been cancelled in the aforesaid manner, such a stamp is deemed to be unstamped.

Is stamp duty payable on all instruments / documents relating to the transfer of immovable property?
Except transfer by Will (or by original nomination in a co-operative housing society) all transfer instruments / documents including agreements to sell, conveyance deed, gift deed, mortgage deed, exchange deed, deed of partition, power of attorneys, leave and license agreement, agreement of tenancy and lease deeds have to be properly stamped before registration.

It is clarified that a when a nominee transfers the flat subsequently in the name of the legal heirs, that transfer instrument is to be stamped as per the market value. If you have purchased a flat in a co-operative housing society on or after 10-12-1985 you have to pay the stamp duty on market value as per the Ready Reckoner. A flat purchased through an agreement for sale on or before 9-12-1985 required stamp paper of Rs. 5 only. However a flat purchased on or before 9-12-1985 will require stamp duty on market value at the time of conveyance of the property in favour of the society. The concept of payment of stamp duty on market value was introduced from 04-07-1980 will be charged on agreement value only.