Why is stamp duty important?
Stamp duty indicates a form of tax that is imposed on documents. Traditionally, a physical stamp - tax stamp, needed to be part of the document to assert its legal validity. The stamp duty has to be paid for the legal claim to become functional. It is imperative for various different kinds of legal transactions including property related transactions.
When you purchase a property, there are a lot of allied costs that come with it. Such incurred costs include the Stamp Duty and registration charges payable to the government. This ensures that the document, which lays your claim to the property is legally valid.
Stamp duty needs to be paid for every document prepared through which any right, title, interest or liability is created or transferred. The amount of stamp duty is dependent on the appraised market value of the property. The process that determines the value of stamp duty to be paid, based on property value evaluation by the Stamp Duty authorities is termed as “Adjudication”.
In the case of real estate transactions, mortgage deeds etc. which tend to be high, the stamp duty value is also high. Stamp Duty charges also vary from state to state and is left to the discretion of the state government. There is a state to state wide variation in stamp duty rates across the country. In the state of Tamilnadu for instance, about 8% of the property value is claimed for stamp duty and about 1% is claimed for registration charges of the property.
It was often felt that the government was repeatedly levying charges on the value of a property, which would in all probability change hands several times, which means the government gets to claim stamp duty charges on a fixed asset for an unlimited number of times. Attempts were made a few years ago to levy charges only on capital appreciation and not the property value as such, however till date stamp duty remains based on the market value of the property.
It is imperative to pay stamp duty when you buy a property. If it is not paid, then document cannot be registered and hence cannot be considered legal and valid. This means it will not pass in court as proof for ownership of the property, which could pose grave problems when any kind of conflict arises in the future.