Flat, land and Property Stamps and Registration charges in Bangalore and India

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Do you know the cost of Flat, land and Property Stamps and Registration charges when you buy a property? Many forget the additional expense which buyer has to bear. Let us discuss this cost in detail.

Stamps and Registration charges

When you buy any property, then you must register in your name to claim the ownership of property. Hence, knowing about the registration cost is very much important.

Please note that this cost of Flat, land and Property Stamps and Registration charges depends on state to state. These costs are not uniform in all states. I try to concentrate on Bangalore or Karnataka (as I reside in Bangalore). However, can easily find out the cost Flat, land and Property Stamps and Registration charges of your state by visiting the respective state registration websites.

What is meaning of Flat, land and Property Stamps and Registration charges ?

When you buy a flat, then there are mainly two costs. One is Stamp duty cost and another is Registration Cost. As I pointed above, it changes from state to state.

When you buy or sell any asset or property, then such selling must be documented. You can do it in plain paper too. However, as per legal terms, it is not valid. Hence, by paying the stamp duty as per law of the land you are claiming that the document or agreement is valid.

Stamp Duty is payable under Section 3 of the Indian Stamp Act, 1899It is a type of tax collected by Government to validate your agreement. A stamp duty paid document is considered a proper and legal document and has evidentiary value and is admitted as evidence in courts. Document not properly stamped, is not admitted as evidence by the court.

Usually, while buying the property, it is the buyer who has to bear the cost of stamp duty cost. Respective state governemnts fix Stamp duty.

Along with stamp duty you also have to bear the cost of registration. So both the processes are very much necessary to claim the ownership of property.

What is Flat, land and Property Stamps and Registration charges in Bangalore or Karnataka?

As per Government portal, the current stamp duty charge for Bangalore and Karnataka is as below.

Stamp Duty-5%

BBMP,Corporation, BMRDA & other Village Areas added Cess 10% on Stamp Duty.

BBMP& Corporation added Surcharges 2% on Stamp Duty

BMRDA & other Village Areas added Surcharges 3% on Stamp Duty

Registration Charge 1% on the value of the Property

So this works out to be Stamp Duty charges as 5.6% in Urban Areas and 5.65% in Rural Areas. Registration charges is 1% of the property value.

The detailed cost of such stamp duty and registration charges are listed in Karnataka Government Portal.

How the Flat, land and Property Stamps and Registration charges are calculated?

Stamp duty and registration charges are calculated based on the salable value of property. Before proceeding further, let us understand the new terminology called “GUIDANCE VALUE“. It is the value declared by respective state government for each area of the state. Below this value, registration of selling is not allowed. So the salable value equals to guidance value or actual salable value (whichever is higher).

Refer the latest Guidance Value of Bangalore at our Blog Post “Guidance Value of Bangalore – How it affects property price?“.

Let us say in Bangalore the guidance value of ABC are is Rs.4,000 per square feet. Then your property registration value for that area must not be below Rs.4,000 per square feet. It may be higher, but must not be below it.

Let us take an example of a property, which is situated in area of ABC in Bangalore Urban Area. Say for example the guidance value of this area is Rs.4,000 and you bought the property at Rs.48 lakh measuring 1,200 square feet.

So in this case the value of property for sale is equal to guidance value. Now the calculation goes as below.

Stamp Duty Charges=5.6% of saleable value (Rs.48 lakh)=Rs.2,68,800.

Registration Charges=1% of saleable value (Rs.48 lakh)=Rs.48,000.

So the total Stamp Duty and Registration charges will be Rs.2,68,800+Rs.48,000=3,16,800.

Hence, the buyer of property needs to pay the saleable value of property, Stamp Duty and Registration Charges.

Actual cost or guidance value to mention while buying property?

Now, whether we have to go ahead and register the property at a guidance value to save stamp duty and registration charges? It is mainly done in many cases to avoid the CURRENT cost. But in reality, when you sell the property, you pay more tax on such profit as a capital gains tax.

Many builders guide you to go for registration of property on guidance value to save the current stamp duty and registration charges. But here is the catch, you may currently save the cost. While selling the property, your cost of buying matters you to pay the capital gains tax. Because the property buying price is fixed by Cost of Inflation Index.  Let me try to illustrate this from below example.

Let us say you bought the property at Rs.40 lakh in the FY 2000-01. You Mr.X planned to go for registration with full saleable value of Rs.40 lakh. However, your friend Mr.Y planned to save some stamp duty and registration charges. So he planned to go for Rs.30 lakh saleable value (which let us consider the guidance value of that property in FY 2000-01).

Let us consider both sold the property in the FY 2010-11 for Rs.75 lakh. In this case, who will pay more tax? Take the below calculation and see how Mr.Y currently might save some Stamp Duty and Registration Charges. However, when he sold the property, he paid the more Long Term Capital Gain Tax on it.

Flat, land and Property Stamps and Registration charges

Do remember that as the tenure of selling goes higher the difference of taxation widens between Mr.X and Mr.Y. Few may argue that by investing Rs.66,000 (amount saved in property registration cost) may be invested somewhere to compensate the future tax loss. However, while selling a property, have you been in the same condition to sell the asset or financial instrument where you invested that saved Rs.66,000? It may or may not be and also it may or may not fetch the return which compensate the future difference of taxation.

Hence, never believe the sellers or builders logic of registering the property for less than actual cost price. Real Estate industry is mainly run by illegal money (to a certain extent it is now reduced). Hence, they force you to register at less rate and give the rest of money in cash. To be frank by doing this, the sellers or builders of properties will be in profit as they have to pay less capital gains tax.

The moral of the story is, go for full saleable value for registration, but never for lesser or on the guidance value of property. In the future, you have to bear more capital gains tax on it.

Note

  • Stamp papers must be purchased in the name of buyer or seller ONLY. No third person is allowed to buy the stamp papers on behalf of buyer or seller.
  • Nowadays eStamp papers are available in states like Gujarat, Karnataka, NCT Delhi, Assam, Tamil Nadu, Rajasthan, Himachal Pradesh, Uttarakhand, UT of Dadra & Nagar Haveli, UT of Daman & Diu, Puducherry, Uttar Pradesh, Chhattisgarh, Jharkhand, Jammu & Kashmir, Punjab and Chandigarh.
  •  e-Stamping is nothing but a stamp paper generated through a computer based application and a secured way of paying Non-Judicial stamp duty to the Government.
  • Few advantages of e-Stampings are-Certificate can be generated within minutes, Certificate generated is tamper proof, authenticity of the certificate can be checked through the inquiry module, it as has a Unique Identification Number (UIN) and specific denomination is not required.

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