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Stamp Duty and Franking Charges in India for Home Property Purchase

Updated: Mar 21, 2022
Stamp-Duty-and-Franking-Charges-in-India-for-Home-Property-Purchase

Are you looking to buy your first home? Or set out to invest in another property? Either way, there are some terms you might have to encounter on your journey. Franking charges and stamp registration charges are some of the most important ones you should know about. These are the additional costs levied by the state governments that you may face in relation to the purchase of a property.

While buying your dream home or property can be a substantial decision in itself, it can be a good idea to know about the charges that are not included in the price of the investment. This can help you plan ahead and be able to secure these funds for when you might be in need of the same. Read on to find out more about stamp duty and franking charges as well as how they can vary from state to state across the country.

According to the Indian Stamp Act 1899, an act that seeks to consolidate and amend the law relating to stamps, a document that is stamped will stand to act as valid evidence in the court of law. This means that this indirect tax acts as direct evidence of your purchase of a property.

Wondering why there is a fee to obtaining such an essential stamp? This is because the main purpose of the act is to generate revenue for the government. The charges associated with obtaining a stamp help to lend legitimacy to your documents.

Difference between stamp duty and franking charges: A common misunderstanding in the minds of homebuyers in India is to confuse stamp duty, franking charges, and registration fees to be one and the same. However, it is important to note that all three of these stand to be individual charges that you might have to deal with separately while buying a property. While stamp registration charges allow you to legalize your property documents by paying a tax to the government, franking charges refer to the actual process of stamping that helps to show that you have made your requisite payment of stamp duty. While the former has to be paid at the time of the registration of your property at the Sub-registrar of Assurances, the process of stamping can be done by banks or anyone authorized by the government.

Some documents that require stamp duty: Since stamp duty helps the government in keeping track of all transactions and is necessary in order to maintain a record of the same, you might be required to bear the stamp registration charges for several documents. Some of these are listed below. Keep in mind that this is not an exhaustive list and subsequent additions are possible.

  • Power of attorney
  • Insurance policies
  • Certificate of sale
  • Exchange bills
  • Deed of mortgage
  • Tenancy and license agreements

Stamp duty and franking charges: Since these costs are imposed by the state governments, they tend to vary based on the state in which you are making the property purchase. They are generally charged as a small percentage of the total value of your purchase.

The table below lists the stamp duty charges for a few Indian states. Please note that these rates can change based on the decision of the government, which is why it might be a good idea to refer to official notifications released by states.

State Stamp Duty
Delhi 3% stamp duty + 5% surcharge as per DMC Act
Maharashtra 10% of the market value of property
Bangalore 2-3%
Tripura 5% - consideration
Haryana 12% - consideration
Punjab 6% - consideration
Madhya Pradesh 7.5% - market value

How to calculate stamp duty: Since stamp duty varies from state to state, the parameters used by these governments to calculate the final charges also differ. These can also be modified every year with the budget of the state government. It can also be beneficial to note that some states offer stamp duty concessions and registration fees benefits to women applicants. Stamp duty charges can be indirectly linked to the market value and performance of the property. The location and jurisdiction of the same, i.e., urban or rural area can also have a say in deciding the final charges collected from you.

Payment of stamp duty: Payment of property registration charges in India is an important step to finalizing your investment. This charge is in addition to the value of your purchase and needs to be settled in full before the state government. You may also be subject to penalties in case you are unable to make allowance for the same. It is not generally a part of your home loan which is why it is advisable to plan ahead and decide how you prepare to arrange stamp duty and franking charges in advance.

Must Read :Tips To Make Home Buying Process Less Overwhelming

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