THAKUR RAMNARAYAN COLLEGE OF LAW,

MUMBAI.

Academic Year 2022-2023

Department: LAW

Full Name: Dhruv Dayanand Mishra

Roll No: 01

Section: B

Subject: Jurisprudence

Date of Submission: 25 April, 2023

Professor In Charge: Prof. Subhash Pathak.

 Constitutional provisions relating to
stamp duty.

I. Introduction.
What Is Stamp Duty & Why To Pay It?
Buying a house is one of the biggest financial decisions that you will make in your
life. It is an overwhelming experience, both financially and emotionally. While buying
a house, we need to identify the property, make a down payment, apply for a loan,
sign the sale agreement, etc. One of the important step & final steps while buying a
house is the possession and registration of your property. After the property’s
possession is transferred to you, it is your responsibility to get it registered in your
name.

Possession is the physical transfer of the property, but it is not sufficient. You also
need to have legal evidence of ownership. For this, you will have to get the property
registered in your name in the local municipal records, with the seller documenting
that the property is being transferred to you. At the time of registration, you will also
have to pay stamp duty, a government tax levied on property transactions. In this
article let’s try to understand what is stamp duty, why is it essential to pay stamp
duty, and many more aspects of stamp duty.

Stamp duty is collected on the basis of the property value at the time of registration.
Stamp duties amount varies from state to state and also property types old or new.
Since it adds up to the property cost, it is better to have a fair idea before you finalize
your property deal. Stamp duty is a legal tax payable in full and acts as 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 regardless of an agreement and in case of property

exchange, both seller and the buyer have 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 payable
under Section 3 of the Indian Stamp Act, of 1899. Stamp Duty must be paid in full
and on time. If there is a delay in payment of stamp duty, it attracts a 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. A document not properly stamped is not admitted as evidence by the court.
When is the stamp duty payable?

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

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 an exchange of properties, both parties have to bear
stamp duty equally.

How should one sign an instrument affixed with an adhesive

stamp?
According to the provisions of Section 12, any person executing an instrument
affixed with adhesive stamps shall cancel the adhesive stamp by writing on or across
the stamp his name or initials. If such an adhesive stamp has not been cancelled in
an aforesaid manner, such a stamp is deemed to be unstamped.

What is the 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 from the instrument, the valuation officer can call for it. Information
such as the area of the flat, number of floors, and year of construction must be
mentioned in the agreement for quicker response.

How should instruments stamped with impressed stamp be

written?
As per the provision of Section 13 of the Indian Stamp Act, 1899, any instrument on
an impressed stamp, shall be written in such a manner that the stamp may appear
on the face of the instrument and cannot be used for or applied to any other
instrument i.e., cancel the adhesive stamp so affixed by writing on or across the
stamp his name or initials. If such an adhesive stamp has not been cancelled in an
aforesaid manner, such a stamp is deemed to be unstamped.
Importance of examining the constitutional provisions
relating to stamp duty.
The basic idea about stamp duty and the obligations imposed under the Indian
Stamp Act, 1899 ("Act") for interstate transactions has been illustrated in our
previous blog. The concept of stamp duty was introduced by the Britishers in 1899
and was applicable for all property transactions. Stamp duty was to be deposited in
the government treasury in accordance to the rates and procedure prescribed. The
amount was collected by government-appointed stamp collectors which would be
transferred to the concerned state under which the individuals are taxed.

The concept of stamp duty exists till date and it is a duty payable on certain specified
instruments1 or documents. Stamps2 and the stamp papers are used in all
commercial transactions. Stamp duty is paid on the prescribed instruments including
conveyance or transfer of any movable or immovable property, such as transfer of
shares or transfer of property on the instrument or document effecting the transfer of
interest in any such property. The payment of stamp duty has been laid down in
Section 33 while the rates of stamp duty payable for different types of documents are
prescribed in Schedule I of the Act. The Act also highlights the provisions regarding
levying, collection and payment of stamp duty.

LEVY ON INSTRUMENT
Stamp duty is a levy payable on instruments specified by statute on a fixed or on ad
valorem basis. If the stamp duty is on ad valorem basis then the amount varies on
the basis of value of the products, services or property on which it is levied. It is
basically a levy on any transaction based on exchange of documents or execution of
instruments.

Additionally, as per the Indian Contract Act,1872, an oral contract by which the
parties intend to be bound is valid and enforceable.4 But there are certain
circumstances in which the law demands that contracts be compulsorily written and
registered (such as leases exceeding 11 months or a leave and licenses
agreement). This is particularly relevant in the context of e-contracts where stamping
of an e-contract poses many difficulties. (More information on this can be
accessed here)

STATE REVENUE
The stamp duty payable on documents varies across different states as levy of
stamp duty is a state subject and it is governed by the provisions of the legislations
enacted by that particular state. As India has adopted the federal structure, the
Constitution of India has provided the States with the right to levy taxes on certain
types of transaction as specified in Entry 44 of the Concurrent List. The proceeds of
stamp duty leviable in any financial year are assigned to the state. State
Governments prescribe by rule that stamps purchased in that particular state alone
should be used for execution of an instrument. Hence, the provisions relating to the
stamping of documents and the value of stamp papers required for a particular
document are provided in the stamp act enacted by that particular state legislature
and in the absence of such state legislation, the stamping is done in accordance to
the Act.
Therefore, to summarize, stamp duty is a documentary impost and not a transaction
tax. It is payable (i) prior to or at the time of execution of the document, or (ii) within
three months of the executed document first being delivered and received in that part
of India where either any conditions precedent or subsequent needs to be
performed, and/or where the property to which the document relates is situated.

As specified in question 3 of our previous blog, there are various ways of paying the
stamp duty. These modes were originated and were made stringent in their
application after the famous Telgi scam5. Central government after this scam
became vigilant and introduced certain change like the Indian Security Press now
has to mandatorily number the stamp papers serially, inserting water marks in the
stamp paper and the name of the state from where the stamp paper is being issued
or distributed by the government should be printed on the stamp paper. Any delay or
short payment on stamp duty attracts heavy penalty.

ESSENTIALS OF STAMPING AN INSTRUMENT

The essentials to be considered while stamping an instrument are as follows:

 The stamp paper should reflect the name of the company/individual who is a
party to the instrument.
 An instrument cannot be stamped for an amount which is lower than the value
as prescribed under the relevant legislation.
 The penalty applicable on an unstamped/under stamped instrument is
computed on an ad valorem rate which varies from state to state and
maximum penalty could range from twice the deficient stamp duty to ten times
the deficient stamp duty. Further, deliberate evasion of stamp duty may also
attract imprisonment.
 Appropriate stamping of an instrument provides it with an evidentiary value in
a court of law.
 Examine whether the instrument is of a mixed nature.

MIXED NATURE OF AN INSTRUMENT

The substance of the instrument indicates the amount of stamp duty to be paid. The
title of the document is not the true indicator of the value of stamp required. It is the
content of the document which should be considered for ascertaining the stamp duty
payable.

A contract of indemnity can be a sole contract and/or part of a larger general contract
between the indemnifier and the indemnified. If a contract of indemnity is contained
as a clause/article in a larger general contract, the same would also need to be
stamped additionally for the indemnity. According to the Bombay Stamp Act, 1958 a
contract of indemnity is stamped at Rs. 500/- (Rupees Five Hundred only).
Therefore, the stamp duty applicable for the indemnity needs to be paid along with
the stamp duty applicable for the larger general contract.

Moreover, in some states of India, if the agreement cover arbitration clause then the
additional stamp duty needs to be paid for the same. For eg: Under the Karnataka
Stamp Act, 1957, the stamp duty levied for arbitration clause is Rs. 200 which is to
be stamped in addition to the general requirements.
 II. Constitutional Provisions Relating to Stamp Duty.
Overview of relevant provisions in the Indian Constitution
Legislative Competence of Union& State Legislature under the Constitution
of India to enact stamp laws:

 The Constitution of India empowers both the Parliament and the State
Legislature to make provisions and laws for stamp duty within its ambit. The
Indian Stamp Act, 1899 is the Central Legislation while the States have their
own local stamp acts to deal with issues arising within that particular State.
The Bombay Stamp Act, 1958 now known as the Maharashtra Stamp Act,
1958 (“MSA”) which came into force on 16th February, 1959 is the law for
stamp duty within the State of Maharashtra.
 To understand the legislative competence of the centre & state to legislate on
stamp duty one must refer to the Seventh Schedule to the Constitution of
India:
 Entry 91 of List I (Union List) of the Constitution of India mentions “rate of
stamp duty in respect of bills of exchange, cheques, promissory notes, bills of
lading, letters of credit, policies of insurance, transfer of shares, debentures,
proxies and receipts”.
 Entry 63 of List II (State List) mentions, "rate of stamp duty in respect of
documents other than these specified in the provisions of List I with regard to
rates of stamp duty."
 Entry 44 of List III (Concurrent List) mentions, "stamp duties other than duties
or fees collected by means of judicial stamps, but not Including rates of stamp
duty."
 Accordingly, ISA covers certain documents as specified in Entry 91 of List I in
the Seventh Schedule to the Constitution of India. Whereas the MSA is
enacted with the object to consolidate and amend the law relating to stamps
and rates of stamp duties other than those in respect of documents specified
in Entry 91 of List I in the Seventh Schedule to the Constitution of India in the
State of Maharashtra. Thus, an instrument is defined under MSA to 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, etc. These documents that have
been excluded, as aforesaid are governed under the ISA.
 From the above, it also becomes clear that the power to levy non-judicial
stamp duty is concurrent under Entry 44 of List III. However, the power to
prescribe rates of non-judicial stamp duty is divided between the Union and
the State by Entry 91 of List I and Entry 63 of List II. (3) The scope of Entry 63
of List II and Entry 44 of List III came up for consideration before the Supreme
Court in Bar Council of U.P. v. State of U.P. [(1973) 1 SCC 261: AIR 1973 SC
231], wherein the Supreme Court stated that ‘once it was held that the power
to tax was within the competence of the State Legislature no question of
repugnancy under Article 254 of the Constitution could arise’.
  The inclusion of the rates on the specified documents in the Union List is with
a view to keep them uniform throughout the country. The Centre can add new
instruments to the aforementioned list only by a Constitutional Amendment. It
is also important to note that under Article 268 of the Constitution, such stamp
duties, as are mentioned in the Union List shall be levied by the Government
of India but shall be collected: in the case of Union Territories by the
Government of India; and in other cases by the states within which such
duties are leviable. Thus, the proceeds in any financial year of any such duty
leviable within any state shall not form part of the Consolidated Fund of India,
but shall be assigned to that state.

Discussion of Article 246 and the Seventh Constitution.

The government of India, through Finance Act, 2019, amended the Indian Stamp
Act, 1899 (hereinafter called as Stamp Act).
The Articles of the Constitution that deals with the Stamp Act are Article 246 along
with the Seventh Schedule and Article 268.
Article 246, along with Seventh Schedule, deals with the distribution of power
between Centre and State. List- I, Union List, provides the matters on which Centre
Government has absolute authority to make any laws. List-II, State List enumerates
the matter on which the State Government has the absolute power to make any
laws. List III, Concurrent List, in respect of the matter enumerated in this list, both
Centre and State Government have the authority to make laws.
In List-I, Union List, entry no. 91, provides that “Rates of stamp duty in respect of
bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies
of insurance, transfer of shares, debentures, proxies and receipts.” So it is clear that
the central government has the power to decide the rate of the stamp duty in respect
of shares and debentures.
Further, Article 268 provides that such stamp duty as mentioned in the List-I, Union
List, (Example, Entry No. 91, Stamp Duty on Bill of Exchange, Shares etc.) shall be
levied by the Government of India, and collected by;
1. In the case of Union Territory, the Government of India, and
2. In the case of any state, by the respective state government.
This distribution of power creates a unique problem with the amendment in the
Stamp Act. Whereas, Section 9A of the Stamp Act, along with The Indian Stamp
(Collection of Stamp-Duty through Stock Exchanges, Clearing Corporations and
Depositories) Rules, 2019 (hereinafter, called as Rules) provides that in case of
securities transacted through a stock exchange or depository, stamp duty will be
chargeable as per the rate specified in the Schedule I.
In the case of securities transacted through other than stock exchange and
depository, the stamp duty shall be as per Schedule I.
The transaction is securities, including the issue of securities. However, it is not
limited only to the issue of securities. It also includes a transfer of securities.
Rules very clearly provide that in case of securities referred in Section 9A, the power
of collection vest with the stock exchange or clearing corporation in case of listed
securities, and in case of securities dealt through depository by depositories.
Article 268 of the Constitution of India very clearly provides that those stamp duties
as are mentioned in the Union List shall be levied by the Government of India but
shall be collected—
(a) in the case where such duties are leviable within any 3 [Union territory], by the
Government of India, and
(b) in other cases, by the States within which such duties are respectively leviable.
So, the power of collecting stamp duty is with the state government for those stamp
duties as mentioned in the union list.

Examination of Entry 63 in the State List of the Seventh

Schedule.

The Constitution of India, by way of the Seventh Schedule, empowers the Union
Government and the State Governments to legislate provisions regarding stamp
duties. Under Article 246, stamp duties on documents specified in Entry 91 of List I of
the Seventh Schedule (‘Union List’) (viz. bills of exchange, cheques, promissory
notes, bills of lading, letters of credit, policies of insurance, transfer of shares,
debentures, proxies and receipts) are levied by the Union. Stamp duties on documents
other than those mentioned above are levied and collected by the States by virtue of
the legislative entry 63 in List II of the Seventh Schedule (‘State List’). Provisions other
than those relating to rates of duty (which fall within the scope the Union List and the
State List) fall within the legislative power of both the Union and the States under Entry
44 of the Concurrent List in the Seventh Schedule of the Constitution.

The Finance Bill, 2019 (‘Finance Bill’) passed by both the Houses of the Parliament
on February 12, 2019 has, inter alia, proposed certain amendments to the Indian
Stamp Act, 1899 (‘Stamp Act’) with a view to streamline levy of stamp duties on
transactions involving financial securities. The Finance Bill will be passed once it
receives Presidential asset and is published in the Official Gazette .
Debentures:

(a) ‘Debentures’ are proposed to be excluded from the definition of ‘bonds’ under
the Stamp Act and a separate definition has been proposed to be introduced. The
newly proposed definition includes any instrument issued by a company evidencing a
debt (like compulsorily convertible debentures, optionally convertible debentures,
etc.), and short-term instruments such as certificates of deposit, commercial usance
bill and commercial papers. Under the existing Stamp Act, only debentures which were
‘marketable securities’ were liable to be stamped under Article 27 of Schedule I to the
Stamp Act. The Finance Bill proposes to delete the reference to ‘marketable securities’
and consequently, all debentures (whether marketable or not) will become liable to be
stamped.

(b) The existing Stamp Act provided that the stamp duty on issue of Debentures
was 0.05% per year of the face value of the debentures up to 0.25%, subject to a cap
of INR 25 lakhs (approx. US$ 35,300). The rate of stamp duty is now proposed to be
changed to 0.005% with no cap. Whether the stamp duty will be calculated on the face
value of the Debentures or whether the premium (if any) at which Debentures are
issued will also be taken into consideration is currently unclear.

Securities: A new definition of ‘securities’ has been proposed to be introduced

under Section 23A of the Stamp Act, which includes, inter alia, ‘securities’ as defined
under the Securities Contracts (Regulation) Act, 1956, derivatives, repo on corporate
bonds, etc. (‘Security(ies)’).

The stamp duty rates proposed for Securities are as follows:

(a) issuance of Securities (other than Debentures): 0.005%. Please note that only
rates of stamp duty payable on ‘transfer of shares’ is covered under the Union
List, and therefore, State Governments are entitled to prescribe rates of stamp
duty payable on issuance of shares.
Therefore, it remains to be seen whether the proposed stamp duty rates would actually
be enforceable); [Union list deals with only ‘issuance of debentures’ and not transfer
of debentures – hence the deletion.]

(b) transfer of Securities (other than Debentures): 0.015% (if on delivery basis) and
0.003% (if on non-delivery basis);

(c) derivatives: 0.0001% to 0.003% depending on the nature of the derivative; and

(d) repo on corporate bonds – 0.00001%.

Removal of Exemption on Stamp Duty on Transfer in

Dematerialized Form: The Finance Bill seeks to amend Section 8A of the
Stamp Act such that the exemption available for transfer of beneficial ownership of
Securities and mutual fund units is proposed to be removed. Such waiver is now
proposed to be made applicable only to transfers of Securities from a person to a
depository or from a depository to a beneficial owner. Please note that the Central
Government is entitled to prescribe rates of stamp duty payable only on ‘transfer of
shares’ but not on ‘transfer of debentures’. Therefore, it remains to be seen whether
the proposed removal of exemption in case of transfer of Debentures in
dematerialized form would actually be enforceable.

Collection of Stamp Duty for Securities’ Transfer in

Dematerialised Form: The proposed introduction of a separate regime for
collection of stamp duty on Securities transactions in dematerialized form is a key
change for stock exchanges, clearing corporations and depositories. A new section,
Section 9A, is proposed to be introduced under which the stamp duty in case of sale,
transfer and issue of Securities, must be collected on behalf of the State Government
through the aforementioned agencies.

(a) In cases of transfer of Securities through the stock exchange, the stock
exchange or a clearing house authorised by it will be liable to collect stamp duty from
the buyer of the Securities at the time of settlement of the transaction.
 III. Stamp Duty Laws in India.
Overview of the Indian Stamp Act, 1899
1. The main purpose of this Act is to generate revenue for the Indian
government.
2. A document which is stamped acts as valid evidence in a court of law.
3. The Stamp Act also makes payment of stamp duty on some documents
compulsory which in return makes those documents legally valid and
authentic.

Stamp Duty
4. The tax payable on a certain and specific document is termed as stamp duty.
Stamp duty can be fixed or varied based on the value of the product.
5. Basically, stamp duty is a tax which is paid on the exchange of documents
or execution of instruments.
6. There are basically two kinds of stamp duty and they are:
7. Impressed stamp- An impressed stamp is produced by the process of
engraving or embossing. The labels in impressed stamps are affixed and
these impressions are done by franking machines in the bank.
8. Adhesive stamp- Adhesive stamps are those stamps which can be stuck to
a document using any form of adhesive. There are two types of adhesive
stamps and they are:
9. Postal stamps- Postal stamps have their limited application. Postal stamps
are used for post office related transactions.
10. Non-postal stamps- Non-postal stamps have wider application compared to
postal stamps. Non-postal stamps are revenue stamp, court fee stamp,
insurance policy stamp etc.
11. There are certain very important terms that are related to The Indian Stamp
Act, 1899. It is important for us to be aware of those terms and they are:
12.
13. Conveyance- Section 2 (10) of the Act defines the term conveyance. It
basically includes an instrument by which property is transferred. It applies
to both movable and immovable property. Sale deed, transfer of lease,
release, settlement are all chargeable as conveyance.
14. Duly Stamped- Section 2 (11) defines this term. It means that the instrument
bears the adhesive or impressed stamp, not below the amount essential by
law and further no violation to the manner prescribed by law. The amount of
stamp to be used is governed by provisions and schedule to the Stamp Act.
 The manner of stamping is governed by section 10 to 19 of the Act and also
by the rules framed by the Government. Under this head are included
particulars as to the description of state ps and the number of stamps to be
used. Thus an instrument which is to be written on paper with an impressed
stamp is not duly stamped if it bears only an adhesive stamp of the value
and vice- versa.

15. Instrument- Section 2(14) defines the term instrument. So instrument means
any document through which any right, liability is created, transferred,
extended or extinguished. A document which helps to record such rights and
liability even though the document itself does not create such right or liability
can also be termed as an Instrument.
16. Instrument chargeable with duty- All the instruments mentioned in the
schedule are chargeable with duty of amount as mentioned in the Act. The
exception to charges is an instrument which is executed by the government
or executed for the purpose of Special Economic Zone.

Valuation of Instrument for levy of stamp duty

As we already know that Instruments are chargeable with duty but then it raises
another question and that is how is the valuation of instruments is done, the answer
to that question is from Section 20 to Section 27 excluding Section 22 of The Indian
Stamp Act.

 Section 20 of the Act states that where an instrument is chargeable in

respect of money in any currency other than that of India then, in that case,
the duty shall be calculated on Indian currency and the exchange rate shall
be applicable on the date of the instrument.
 Section 21 provides that where an instrument is chargeable with ad
valorem duty in respect of stock, securities then, in that case, the value of
the day is calculated by the average price of the stock or security in the
day of the instrument.
 Section 23 deals with interest, it states that where interest is payable by
the terms of an instrument in such a case the value of the duty shall not
exceed the charge by which it would have been initially chargeable.
 Section 24 states that duty is also payable on the amount of debt when a
property is transferred wholly or partially.
 Section 25 talks about the computation of duty in the case of annuity and it
is as follows:
 When the annuity payable is for a definite period and a certain amount
then, in that case, it is the total amount.
 When the annuity payable is for an indefinite period or in perpetuity and a
certain amount then, in that case, it is the amount payable in the first 20
years from the date on which the first payment becomes due.
Discussion of stamp duty rates and exemptions.
When buying a property, we have to pay certain charges such as stamp duty and
registration fees. While the registration fee amounts to only 1% of the total project's
cost, the stamp duty may vary from 5-10%, depending on the city or state.

Buying a plot or house could be one of the most significant milestones in an individual's
life. The cost of the properties is increasing at a constant rate, so purchasing an abode
seems quite an intricate task. It's one of the most significant expenses anybody can
incur in their entire life.

Such an expense grows with miscellaneous costs such as the registration charges
and stamps duty fees. Remembering that you can't even escape such costs when
purchasing a home is essential. They are mandatory, and every home buyer has to
pay them to finish the transfer process.

Stamp Duty and Registration Charges Tax Exemption

Before we delve into the tax exemption part, let us quickly discuss the stamp duty and
registration charges. Stamp duty is a form of tax imposed on any monetary transaction
to purchase a property. After the launch of the Indian Stamp Act in 1899, this charge
on the property and part of the property cost was levied. Stamp duties are set on
numerous transactions such as sale deeds, conveyance deeds, and power of attorney
papers. A person can collect property-related documents only when the stamp duty is
paid.

Also, the tax benefit or maximum deduction allowed to a home buyer for additional
stamp duties and registration charges are limited to ₹ 1.5 lakhs. Plus, it is prone to
fulfil the underlying requirements defined under this Section.

Stamp Duty Deduction under 80C

Most of us know that saving tax under Section 80C by investing in many excellent
schemes such as ELSS (Equity-linked saving scheme), PPF (Public Provident Fund),
life insurance, etc.

Nevertheless, we must be aware that specific expenditures are allowed under Section
80C of the Income Tax Act, 1961. Those expenditures can help you save taxes too.

If your expenditure totals ₹ 1.5 lakh or more, you must stop making any more
investments, or you won't fully use the Section 80C tax saving limits.

1. Home Loan Principal Repayment

If you are a home buyer and have to pay hefty EMIs, Section 80C could relieve you.
The EMI you pay every month has two main components: Principal and Interest.

You can claim the total principal amount you pay in one financial year as a deduction
under Section 80C from total gross income before calculating the net taxable income.
Not only individuals but Hindu Undivided Families can also claim this deduction. You
can obtain a loan certificate either from the lending bank's online portal or directly from
the branch. The certificate will indicate the total EMI you have paid to repay the
principal amount borrowed in a year.

You can also claim the payment of interest on the loan as a deduction from total gross
income under Section 24 and Section 80EE/Section 80EEA. It is subject to some
specific terms and conditions.

If you sell your house within the time frame of five years from the end of the financial
year in which the possession of the property was obscured, then the deduction you
claimed previously will be added back to your income in the year of sale.

2. Specific Payments for the Purchase/Construction of Residential Property

If you plan to buy a house, you need to pay certain charges besides the cost of the
house. Income Tax Act states that any registration fee, stamp duty and other expenses
incurred while purchasing a property are entitled to a deduction from total gross
income in the financial year in which such costs are incurred.

'Other expenses' here indicates any statutory other expenditures that are identical to
registration charges or the stamp duty payable (if any applicable on the property
transfer).

3. Payment to Housing Board, Development Authority or other Authority for

Buying a House

Suppose you have bought a house from a Development Authority such as the DDA
(Delhi Development Authority) under the instalment finance scheme and are paying
the authority the instalment. In that case, you can claim deduction under Section 80C
against any amount paid to the principal repayment.

Eligibility for Tax Benefit on Stamp Duty and Registration Charges

As you already know, stamp duty and registration charges are an obligatory part of all
property transactions in real estate. Nonetheless, only a few categories can claim the
tax benefit available under the tax laws.

The following entities can claim tax benefits under Section 80C of the Income Tax Act,
1961.

 Individuals
 Hindu Undivided Families (HUFs)

Income Tax Exemption on Stamp Duty, on House and Land Purchase

Until now, you might have got a mere idea about where stamp duty applies. It is paid
mainly for the registration of residential or commercial properties. This tax applies to
the transfer of ownership in real estate.

If you are an assessee, you can opt for stamp duty exemption up to a limit of ₹ 1.50
lakhs. Nevertheless, you can never avail of an income tax exemption on stamp duty
on land purchase.
In case you wish to be qualified for a stamp duty rebate, then you have to be a member
of HUF (Hindu Undivided Family), or an individual owner, or a co-owner with a
residential property. However, if the assessee has joint ownership, the tax exemption
could be an option for the co-owners up to ₹ 1.5 lakhs.

Stamp Duty on Home Loans

Well, there's no such rules or provisions that state that a person has to pay specific
stamp duty on the home loan they avail of. Besides, no term or clause states any
registration charges on home loans.

If the home buyer requires the loan, the bank can sanction it. However, it's an out-of-
pocket expense that the home buyer or property owner needs to pay later.

Every state has a different set of stamp duty fees on the purchase of the property.
Some of them allow concessions to female property buyers and senior citizens to
encourage them to buy property.

Who all can Claim Stamp Duty and Registration Charges Tax Exemption?

Any person who fulfils any of the following criteria described below can claim
deductions or exemptions on stamp duty and registration charges on the property
bought:

 The assessee can claim deductions only in the year they made the actual
payments toward such expenses;
 You must be a member of a Hindu Undivided Family;
 If the construction of the property is done and the owner possesses the house
legally;
 If the assessee has paid the amount against all such expenses;
 If the house is in the name of the individual (or under your name) claiming the
exemption;
 Only if you are buying a new residential property and not the commercial or
resale property;
 The property must not be under-construction;
 Any other entity/person must not pay the expenses;
 Residential land or plots do not meet the criteria for claiming exemption under
Section 80C;
 In case you are a joint owner, you can claim deductions on stamp duty and
registration charges in the fraction you share the house property with others up
to ₹ 1.5 lakh each under Section 80C;
 You can't claim such charges if you or any assessee has already inhabited the
house property either partially or wholly;
 If you or the assessee has paid any other expenses for the property transfer, it
will also be eligible for deduction. For instance, under Section 80C, service tax
paid can also be claimed as a deduction;
 Suppose the assessee has transferred the house property within five years of
purchase. In that case, the entire deduction amount allowed will be deemed the
assessee's income in such a financial year or the previous year in which the
transfer was altered. Hence, the assessee will be accountable for paying tax
for the transfer of house property in the assessment year.
 IV. Conclusion.

A stamp duty is payable by the parties to an agreement to a state government for

recognizing an agreement. Stamp duty is revenue for the state government even if it
is imposed by the central government (as in few instruments as discussed above).
Respective state governments have authority to impound or nullify the effect of an
agreement if such agreement is inadequately stamped.

Apart from the discussion as mentioned above, state governments including the
Karnataka Government have initiated the concept of e-stamping. E-stamping in the
State of Karnataka is governed by The Karnataka Stamp (Payment of Duty using e-
stamping) Rules, 2009 (the Rules). According to the provisions of the Rules, any
person paying stamp duty can receive an e-stamp certificate by approaching any
approved authority (as defined in the Rules) and by furnishing requisite details, as
required under the Rules, along with the payment of stamp duty amount. Any person
can purchase e-stamp using cash, pay order, bank draft or any other mode of funds.
The Rules further provide that e-stamp certificate shall be visible in the face of the
instrument against which it is issued.

Inadequate stamping of a document or an instrument can lead to grave

complications. It is important for a document to get stamped properly to avoid
unnecessary delays. It is much debated to reduce the stamp duty charges as it is
already required to be paid over and above the cost of the property and any changes
in the rate/duty/charges influence the decision. States gain a large share of revenue
out of the stamp duty and the focus should be towards reducing the charges for
more individuals and companies to come up and get their documents stamped. For
professionals and practitioners, it is highly crucial to be aware of the stamp duty
payable/applicable in states where the document is executed.

The Indian Stamp Act, 1899 (2 of 1899) is a fiscal statute laying down the law
relating to tax levied in the form of stamps on instruments recording transactions
& Stamp duties on instruments specified in Entry 91 of the Union List (viz. Bills
of Exchange, cheques, promissory notes, bills of lading, letters of credit, policies
of insurance, transfer of shares, debentures, proxies and receipts) is levied by
the Union. Stamp duties on instruments other than those mentioned in Entry 91
of the Union List above are levied by the States as per Entry 63 of the State
List. Provisions other than those relating to rates of duty fall within the legislative
power of both the Union and the States by virtue of Entry 44 of the Concurrent
List. Stamp duties on all the instruments are collected and kept by the
Concerned States.