What is Stamp duty?
It is a tax, related to income tax and sales tax (VAT) collected by the government. Stamp duty is payable under the section 3 of the Bombay Stamp Act, 1958. Different amount of stamp tax is payable for the different type of documents as per the schedule – I of The Bombay Stamp Act, 1958. Stamp duty needs to be paid in full and also on time. In case, if there is a delay in payment of stamp duty, it attracts penalty. A Stamp tax paid document is considered a proper and legal document as such get evidentiary value and is accepted as evidence in the court. Document not correctly stamped is not approved as evidence by the court.
When is stamp duty payable?
It is payable either before the execution of the document or on the day of execution or the next working day of the executing a document. Execution of a document indicates putting signatures on the document by the persons who are party to the document. Nevertheless, it is advisable to pay stamp duty before executing the document, for all practical purposes.
Who is liable to pay stamp duty?
During the absence of any agreement to the contrary, the buyer or transferee must pay stamp tax, or in case of exchange of property and land, both parties have to bear stamp duty equally.
Is stamp duty payable on a transaction or the document?
It is payable on the document and not on a transaction. it’s imposed on the data of the contents of the document only. If any information vital for working out stamp paper is missing in the document, valuation officer can call for the same. Information like the carpet or built-up area of the flat, year of construction, number of floors in the building, name of Division/Village and C.S./C.T.S. number of a plot of land on which property is located must be mentioned in the agreement.
In whose name the stamp paper needed to be purchased?
From 01/05/1994 stamp paper is to be acquired in the name of one of the individuals to the document. In case, if the stamp paper is not in the name of one of the individual, and if it is used for preparing the contract, then such agreement will be treated as if no stamp paper was used. Though, it will not make the agreement invalid and can be enforced by law if proper stamp duty is paid subsequently.
What is determined by the market value of the property?
Market value concerning any property which is the subject matter of the document indicates the price which such property would have retrieved if sold in the open market on the date of execution of such paper or the consideration stated in the paper, whichever is higher. As per section 50C of the Income Tax Act, the market value for the purpose of capital gains tax is the same as the market value for stamp duty amount, which is worked out according to the stamp duty ready reckoner. Hence, it is advisable that the seller should record the actual selling price worked out with the help of ready reckoner and avoided under-valuation with the intention of saving capital gains tax.
Does stamp duty payable on the market value of the property or on consideration as declared in the agreement?
Yes, stamp duty is payable on the market value of the property. The stamp duty authorities determine the market value of any property. If the consideration value is higher than the market value, the consideration amount will be treated as the market value. However, where the property is sold or allotted by a semi-government or government body or a local authority or a government undertaking such as LIC, BMC, CIDCO, MHADA, the Income Tax Department on the basis of predetermined amount, then that value is accepted as market value for the purpose of stamp tax.