STAMP DUTY, CANCELLATION OF STAMP, EFFECT OF DEFICIT AND REMEDY

Buying a house is one of the biggest financial decisions that one will make in their life. It is an
overwhelming experience, both financially and emotionally. While buying a house, one need
to identify the property, make down payment, apply for loan, sign the sale agreement, etc.
One of the important step & the final step while buying a house is the possession and
registration of the property. After the possession of the property is being transferred to, it is
the new owner’s responsibility to get it registered in their name. Possession is the physical
transfer of the property, but it is not sufficient. One also needs to have legal evidence of
ownership. For this, the person will have to get the property registered in his/her name in
the local municipal records, with the seller documenting that the property is being
transferred to him/her. At the time of registration, one has to pay a stamp duty as well.

Stamp duty is collected on the basis of property value at the time of registration. Stamp
duty’s amount varies from state to state and also property type—old or new. Since it adds up
to the property cost, it’s better to have a fair idea before you finalize your property deal.
Stamp duty is a legal tax payable in full and acts as an evidence for any sale or purchase of a
property. The levy of stamp duty is a state subject and thus the rates of stamp duty vary
from state to state. The Centre levies stamp duty on specified instruments and also fixes the
rates for these instruments.

It is usually paid by the buyer with regardless to agreement and in case of property
exchange, both seller and the buyer has to share the stamp duty equally.

What is stamp duty?

It is a tax, similar to income tax, collected by the government. Stamp duty is the tax levied by
the State government when a property is transferred from a seller to a buyer. Only when the
receipt or acknowledgement of payment of stamp duty is received, will you be considered a
legal owner of that property. In other words, payment of stamp duty acts as proof of
ownership in court, in case of any dispute. So, you are considered the owner of a house
property when your sale agreement is registered and signed, and the stamp duty and
registration charges are paid.

A stamp duty is also applicable on conveyance deeds, sale deeds and power of attorney
papers and this rate varies with each State (2-7 per cent). For instance, the stamp duty in
Maharashtra is currently around 2 per cent of the value of the property, while in Tamil Nadu,
it is around 7 per cent. A stamp duty is a mandatory payment and usually has to be borne by
the buyer.

Stamp duty is payable under Section 3 of the Indian Stamp Act, 1899. Stamp Duty must be
paid in full and on time. If there is a delay in payment of stamp duty, it attracts penalty. A
stamp duty paid instrument / document is considered a proper and legal instrument /
document and has evidentiary value and is admitted as evidence in courts. Document not
properly stamped, is not admitted as evidence by the court.

When is the stamp duty payable?

The payment of stamp duty must be rendered in full. The collection of the stamp duty must
be completed on time, or it will incur fines. It is a legal document which can be used in court
as evidence and has meaning. 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. The payment typically is made by the property's buyer. In the case of an
exchange of goods, both the buyer and the seller shall be liable to pay stamp duty equally.

What is the penalty charge?

Any delay in duty payment will pull in 2% per month to the maximum of 200% of the deficit
amount of stamp duty. Stamp papers are to be purchased in the name of either of the
parties, i.e, seller or buyer involved in the agreement, failing which will disable the stamp
paper. It is said to be valid for six months from the date of purchase, only if the duty is paid
on time.
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.

What is instrument?

Instrument means any document by which any right or liability is, or purports to be, created,
transferred, limited, extended, extinguished or recorded. 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.

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

Except transfer by Will (or by original nomination in a co-operative 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. 

Refund of Stamp Duty

One has to claim within 6 months (limitation period) for claiming the Stamp Duty. Stamp
Duty is refunded after deducting 10% of the total amount of Duty Paid, but refund of
payment made through e-payment, the deduction is Rs. 1000 per challan.

The party desiring to have refund of taxation (Stamp Duty) must apply to the involved
District Collector / Sub-Collector / Deputy Collector / R.D.O / Tehsildar under section2(9) of
Indian Stamp Act, (I. S. Act) through the Sub-Registrar dully mentioning the explanations for
seeking refund beside challan and receipt in original issued by the selected Bank branch.

The Sub-Registrars on receipt of such application can verify the scroll P.C.R etc. Once
satisfying that the challan and receipt are genuine and haven’t been utilized can issue the
certificate to it have an effect on. Basing on the Certificate issued by the Sub Registrar (S.R.)
the Amounts are refunded after deducting 10% of the entire amount of Stamp.

On what ground one can claim stamp duty refund?

 Paid excess stamp duty or penalty.

Penalty on instrument not duly stamped

When proper stamp duty is not paid on the instrument at that time certain penalty is
imposed by the collector. This penalty may be of the payment of the insufficient stamp duty
and fine of Rs. 500 or he may take the fine up to 10 time of the insufficient stamp duty.

The collector has got the maximum power in context of revenue at the district level. He has
got power to punish, impose fine and forfeiture of the property.

Section 33 of the Indian Stamp Act, 1899:

Instruments which are unduly stamped will get impounded: If an instrument is brought
before an authority entrusted with the duty to examine such documents and the instrument
is found to be unduly stamped then they are supposed to impound the instrument.[The
word ‘impound’ means the seizing of documents which infringe law in some way.
Impounding is usually done by a person who has the authority to examine deeds under law.
Also, the words ‘unduly’, ‘insufficiently’ and ‘inadequately’ are used synonymously in the
course of this article. The legal definition of a duly stamped is present in section 2(11) of the
Act.]

Instruments not duly stamped are not admissible as evidence (section 35): Any instrument
which is not duly stamped is not admissible as evidence. In order to make such an
instrument admissible as evidence, the duty which is chargeable on the document will be
levied or, in case of insufficient stamping, a penalty of ten times the value of duty has to be
paid.

Development agreement
A development agreement is a legally binding contract between a property owner or
developer and a local government, often including terms not otherwise required through
existing regulations. These agreements can specify various elements of the development
process ranging from phasing of a larger master-planned community, to tax-sharing for retail
development, to critical infrastructure responsibilities. Development agreements are
sometimes used in combination with a planned unit development (PUD) in the form of a
binding PUD agreement that specifies the negotiated terms of the development, but the two
tools may also be used independently.

For hazard mitigation purposes, development agreements can be used to guarantee that a
proposed development reduces risk to hazards by requiring it meet certain use
requirements, site development standards, conservation practices, or long-term
maintenance provisions not already required by land development regulations. Development
agreements can also be used as an incentive. For example, if a developer agrees to enter into
an agreement to include defensible space elements in a large-scale development in the wild
land-urban interface, the local government might offer reduced fees, expedited review, or
even density bonuses in exchange.

To establish a development agreement, the developer and the local government both work
with legal counsel to develop and execute a contract that binds all parties. During the
negotiation of such an agreement, planning staff should work closely with their land use
attorney, appointed and elected officials, and the public.

What is the purpose of the development agreement?

Crafting the purpose and goals will solidify the reasons why a development agreement is
necessary and helps facilitate a process where the expectations for both parties are clearly
articulated. This step should also act as a screening process for whether the purpose of the
development agreement is consistent with a comprehensive plan or other policies generated
by the jurisdiction.