What is stamp duty? Why should stamp duty be paid?

It is tax, similar to sales tax and income tax collected by the Government, and must be paid in full and on time. If there is delay in payment, it attracts penalty. A stamp duty paid instrument/ document is considered a proper and legal instrument/ document and such gets evidentiary value and is admitted as evidence in courts. Instruments /documents not properly stamped are not admitted as evidence by the court.

What is the penalty for delayed payment?

If stamp duty is not paid on time, it attracts penalty at the rate of 2 % per month on the deficit amount of the stamp duty. However maximum penalty can be only 200% of the deficit amount of the stamp duty. (This amendment has come into force from 01-05-2001) Documents lodged with the sub-registrar/superintendent of stamps prior to any amnesty scheme will attract a lump sum penalty of Rs.250 or Rs.300 only, as the case maybe.

When is the stamp duty payable?

It is payable before execution of the document or on the day of execution of document or on the next working day of executing such a document. Execution of the document means putting signature on the instrument by the person’s party to the document.

Who is liable to pay?

In the absence of any agreement to the contrary, the purchaser/transferee has to pay stamp duty or in case of exchange of properties, both parties have to bear stamp duty equally.

Is stamp duty payable on all instruments/ documents relating to the transfer of immovable property?

Except transfer by will (or by original nomination in a cooperative housing society) all transfer instruments/documents including agreements to sell, conveyance deed, gift deed, mortgage deed, exchange deed, deed of partition, power of attorneys, leave and license agreement, agreement of tenancy and lease deeds have to be properly stamped before registration.

It is clarified that a when a nominee transfers the flat subsequently in the name of the legal heirs, that transfer instrument is to be stamped as per the market value. If you have purchased a flat in a co-operative housing society on or after 10-12-1985 you have to pay the stamp duty on market value as per the Ready Reckoner. A flat purchased through an agreement for sale on or before 9-12-1985 required stamp paper of Rs.5 only. However a flat purchased on or before 9-12-1985 will require stamp duty on market value at the time of conveyance of the property in favour of the society. The concept of payment of stamp duty on market value was introduced from 04-07-1980 will be charged on agreement value only.

What is the relevance of the dates 10-12-1985 and 04-07-1980?

For any flat purchased in a co operative housing society on or after 10-12-1985, it is required to pay stamp duty on market value at the time of signing the agreement itself. However, prior to 10-12-1985, such transactions of agreement for sale required a stamp paper of Rs.5 only at the time of signing the agreement. However stamp duty on market value will have to paid on all such transactions at the time of conveyance of the property in favour of the society.

From 04-07—1980 onwards, if the property is not covered under the Co-operative Society Act, you are required to pay stamp duty on market value. This payment is required at the time of execution of the document. However, prior to 04-07-1980 there was no market value concept hence agreement value was accepted for stamp duty payment.

In whose name should the stamp paper be purchased?

From 01/05/1994 stamp paper are to be purchased in the name of one of the parties to the instrument/ document. If the stamp paper is not in the name of the parties and if it is used for preparing the agreement, it will be as if no stamp paper was used. However it will not make the agreement invalid and can be enforced in law if proper stamp duty is paid subsequently.

Prior to 01/05/1995 stamp paper could be purchased in any name and was valid for any period of time. However from 01/05/1994 stamp paper is valid for a period of six months from the date of purchase and after that it is treated as ordinary paper as if it has no stamp.

In whose name should the Banker’s pay order be issued?

It should be issued in favour of “Superintendent of Stamps, Mumbai”

Is stamp duty payable on the instrument or on the transaction?

It is payable on instruments and not on transactions. Stamp duty should be charged on the basis of the contents of the instrument only. If any information essential for working out stamp duty is missing in the instrument, valuation officer can call for it. Information such as the area of the flat, number of the floors and year of construction must be mentioned in the agreement for quicker response.

What are the instruments on which it is to be paid?

Instruments include every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of shares, debentures proxy and receipt (which is charged under India Stamp Act).

The addresses of the stamp office in Mumbai are as under –

The Superintendent of Stamps

General Stamp Office,
Ground Floor,Town Hall Building,
Shahid Bhagatsingh Road,Fort,
Mumbai 400 023.
Ph: 266 4589, 266 4585.

Office of the Superintendent of Stamps

First Floor, B.M.R.D.A. Building,
Bandra (East),
Mumbai 400 051.
Ph: 645 1894.

Stamp Office

Town Hall,
Collector's Office Compound,
Thane (West) 400 601.

 (The Thane stamp office is open on Tuesdays and Fridays only and is closed on the 18th of each month for accounts purposes. If the 18th happens to be Tuesday or Friday, the office will be open on the next working day)