A frequently asked question on various realty forums is: Is stamp duty applicable for resale flats? Before trying to find an answer to that question, let us try to find the meaning of the specific words used in this question.
What is stamp duty?
Stamp duty is a tax imposed by the state governments in India on various legal documents, including property transactions. When you buy or transfer ownership of certain assets, such as real estate, stocks or other valuable items, you are required to pay stamp duty to legalise and formalise the transaction. The amount of stamp duty is usually a percentage of the transaction value or a fixed amount. Stamp duty varies from one state to another.
The purpose of stamp duty is to validate and authenticate legal documents, ensuring that they are legally binding. Stamp duty is a major source of revenue for states. Common documents on which stamp duty is levied include sale deed, sale agreement, lease, gift deed, power of attorney, etc.
For homebuyers, it is essential to be aware of the prevailing stamp duty regulations when engaging in any transaction that requires the execution of legal documents.
What is registration fee?
Paid along with the stamp duty, registration fee is a tax imposed by the government for officially recording and validating legal documents, typically related to property transactions. When you register a document, it becomes a part of the official public records, providing legal recognition to the transaction. The fee is payable at the time of registering these documents with the sub-registrar or registrar of assurances.
The registration fee is separate from the stamp duty. While stamp duty is calculated as a percentage of the transaction value, registration fee is generally a nominal charge that covers the cost of maintaining public records.
What is a resale flat?
A resale flat is a term used for a previously occupied property that is being put up for sale by its current owner. When compared to an under-construction property, a resale flat has already been lived in or used by a previous resident. When someone decides to sell their existing home, and another individual purchases it from them, it is considered a resale transaction.
Stamp duty on resale flats
Section 3 of the Indian Stamp Act, 1899, makes it mandatory for the parties involved in the process to pay stamp duty on sale deeds. So, a sale deed, irrespective of whether it is being executed for an under-construction property or a ready-to-move-in flat or a flat in the secondary market, must be registered. Thus, a buyer has to pay the applicable stamp duty and registration charges in his state, irrespective of whether it is an upcoming project or an old property as long as a sale deed is executed.
If you are buying a house in Delhi that will be ready for possession, say, in two years, you will pay 6% as stamp duty and 1% as the registration charge on the purchase. The charges remain the same if you buy a property from the resale market. The same remains true for ready-to-move-in flats available with builders.
GST on resale properties
The relief in expense that buyers of resale properties enjoy, is in terms of the Goods and Services Tax (GST). As a ready-to-move-in flat does not fall under the ambit of work contract unlike under-construction homes, no GST is charged from the buyer at the time of purchase.
However, if you are buying a property from a developer who has paid the GST for the house during its construction cycle, they would certainly add up those charges to the overall cost. This means that even though an invoice will not be raised and there will be no mention of the GST, the buyer will eventually bear the cost, anyhow.
Recall here that while the GST has subsumed several state and central levies on realty transactions, stamp duty and registration are not among those. Despite a recurring demand from businesses, industry experts and buyers, states have refrained from waiving stamp duty and registration charges completely, as these duties are the single-biggest sources of revenue generation for states.
See also: 11 facts about stamp duty levied on property purchase
FAQs
Has GST subsumed stamp duty on property purchases?
No, stamp duty and registration charges have to be paid separately on home purchases.
Who pays stamp duty on resale property?
The buyer pays the stamp duty during property registration.
Is stamp duty less for women buyers?
Most states charge lower stamp duty rates if the property is registered in a woman’s name.
Is stamp duty lower for resale flats?
No, states in India charge a uniform stamp duty, irrespective of whether the property is from the primary segment or secondary segment. So, for example, if buyers in Delhi pay 6% stamp duty on purchase of property, the rate is applicable for new flats as well as resale flats.
What is the primary market in real estate?
The secondary market in real estate comprises first-hand or new properties, upcoming projects and under-construction residential areas.
What is the secondary market in real estate?
The secondary market in real estate comprises second-hand or resale properties, existing homes and established residential areas.
Are resale flats cheaper than new flats?
No necessarily! An old flat in a premium location can cost a lot more than a new flat in an upcoming locality.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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