The stamp duty is a tax imposed by states in India on property transactions. This tax must be paid by the buyer to the state government through the office of the sub-registrar when registering the property. In addition to the stamp duty, a registration fee must also be paid for the documentation. States are responsible for imposing this tax, and the stamp duty rates vary from one state to another. This tax is crucial to ensure that the property can be registered in the government’s legal records.

The registration law of 1905 and the Indian Stamps Act make it mandatory to register property documents like conveyance deeds, title deeds, gift deeds, etc. The law states that avoiding stamp duty can result in a penalty of up to 10% of the liability. Additionally, in the event of a future dispute, unstamped property documents will not be admissible as evidence in a court of law. Although it is illegal to avoid paying stamp duty, there are safe and legal ways to reduce stamp duty on real estate purchases in India.

Almost all Indian states, with a few specific exceptions, provide women homebuyers with discounts. In the national capital, Delhi, for instance, women buyers pay only 4% stamp duty compared to the 6% rate for male buyers. You might consider registering the property in the name of a woman in the household to take advantage of this benefit. In Mumbai, women homebuyers pay a stamp duty of 5%, while male buyers pay 6%. However, West Bengal does not offer any such rebate for women buyers, and the stamp duty is the same for both males and females.

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Purchasing property is a lengthy and very personal process. Choose this option only if you do not foresee any legal issues regarding title ownership and its potential misuse in the future. Additionally, note that if a sale deed is registered in a woman’s name, there may be a chance that the property tax owed for the property will be less.

Circle rates are the government-determined value below which you can’t register your property. This is the standard by which the stamp duty is determined. You might think about registering your property based on its circle rate value because, in certain situations, it might be less than the market rate.

Assume that you have to pay Rs 1 crore for your property because the local market rate is higher than the circle rate set by the government. The cost of the property comes to just Rs 80 lakh when the circle rate value is used. Therefore, registering the property at the circle rate value is safe from a legal standpoint. A woman buyer would pay Rs 3.20 lakh (4% of the property value) in stamp duty if the property was located in Delhi. She would have to pay Rs 4 lakh if she registered the property at the Rs 1 crore purchase price.

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The value of your property is also reduced on paper when you register it on a circle rate. This means that if you sell this property in the future, you may not be able to demand, say, Rs 1.20 crore for a property registered at Rs 80 lakh a couple of years ago. Also, doing so would mean the applicability of capital gains tax at a higher rate.

Additionally, in some jurisdictions, the higher of the market value and the circle rate is used to compute stamp duty. The property must still be registered using the higher of the circle rate or market value, even if it was bought below that rate.

The property's market value may occasionally be less than the circle rate. However, you might be required to pay more stamp duty for a property of lower value because the law only requires you to pay stamp duty on circle rates. There is a way out of this situation, though.

If the market value of a property is less than circle rates, buyers are free to file an appeal with the sub-registrar to review circle rates under Section 47 of the Indian Stamps Act.

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Pending your appeal, the property will remain unregistered. If the sub-registrar is not persuaded, you might also have to pay the previous stamp duty.

In the case of an under-construction property, a buyer pays stamp duty based on the construction cost and his undivided share of the land on which the structure stands.

For example, purchasers of properties that are still under construction in Tamil Nadu and Karnataka pay stamp duty in two installments. First, the buyer's undivided share (UDS) is used to register the property in his name. Therefore, displaying a lower UDS would result in a lower stamp duty. After the project is finished, the property is registered a second time, and the stamp duty is calculated for the full value of the property.

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In the event that you were to sell this property, you would incur a financial loss. You might be causing your property to depreciate permanently.

A buyer undertakes long research for future purchases. Because there are state-specific benefits available at the time of property registration, it might be a good idea to research the local stamp duty law.

For example, the stamp duty on family property transfers in Uttar Pradesh is limited to Rs 7,000 (Rs 6,000 for stamp duty plus Rs 1,000 for processing fees). Even though the government of Maharashtra is currently reviewing this provision to increase revenue collection, property transfers within a family only incur a stamp duty of Rs 200.

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These regulations are usually more focused on gifts and wills than on actual transactions.

When your income tax liability is discharged, you can save money. Under Section 80C of the Income Tax Act, a buyer can claim a Rs 1.50 lakh deduction against stamp duty and registration charge payment on property purchases. In the case of joint ownership, each co-owner may claim this deduction under his or her portion of the property.

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Only individuals and HUFs can claim this deduction. Only the year in which the stamp duty and registration fees were paid may be used to claim this deduction. The deduction can be claimed, for example, in FY2025 (April 2024 to March 2025) if the property was bought and registered on October 20, 2024.

You can use a gift deed to transfer property to a blood relative because the state will reimburse you for the stamp duty that must be paid on the deed. Another advantage is that the donor, not the donee, is liable for paying the stamp duty at the time the gift deed is executed, and this rebate is incredibly small.

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Only stamp duty on transfers to blood relatives is eligible for the rebate. In other situations, the donor is required to pay the state's applicable stamp duty. The donor may suffer financial hardship as a result of having to pay the stamp duty and give the property away without getting anything in return. It is illegal for the donor to execute a gift deed and receive consideration for the property. In these situations, the transaction will be handled like any other property transfer, and the relevant registration and stamp duty fees will be charged.

Affordable housing projects are subject to lower stamp duties than other residential projects. Therefore, you can legally take advantage of lower stamp duty by investing in affordable housing projects.

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Affordable housing projects are exempt from stamp duty, but this shouldn't be the only consideration. Before choosing a project, make sure it meets your needs by taking into account its location, configuration, and connectivity.

For those who own kutcha houses, the Pradhan Mantri Awas Yojana (PMAY) provides affordable housing. Usually, these properties have a lower stamp duty than ordinary properties. Additionally, PMAY helps women homebuyers who are considering financial aid.

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It is important to fulfill all eligibility criteria, such as not owning a pucca house anywhere in the country, for both the applicant and their family members to qualify for the PMAY scheme.

According to legal experts, one should never undervalue their property when registering it to save money on stamp duty. They claim that this may have serious financial and legal repercussions.

For example, it will be very difficult to find a buyer who is willing to pay a fair value for your property if you choose to sell it for less than it is worth. You, as the seller, will have to pay a lot of taxes on capital gains, even if that somehow works out.

When a property’s actual value is Rs 2 crore but registered at Rs 1.5 crore in 2010 and then sold for Rs 3 crore in 2023, the seller would make a profit of Rs 1.5 crore —20% of this amount i.e. Rs 30 lakh must be paid as taxes. If the property were not undervalued at the start, the owner will pay 20% of Rs 1 crore as the long-term capital gains i.e. Rs 20 lakh.