Step by Step Guide: How to Use a Stamp Duty Calculator?

Step by Step Guide: How to Use a Stamp Duty Calculator?

Buying one’s own house in India has always been a major life goal for individuals. Indians have a traditional preference for owning a property and prefer this to renting one. Therefore, they work towards this goal either by themselves with their life savings, or with the help of a home loan. 

A home loan is not a linear transaction that involves the lender and the borrower. It is a complex financial tool that incorporates several additional costs such as stamp duty, registration, or brokerage costs. If you’re looking to avail of a home loan, it is crucial that you know these inbuilt, secondary costs. Read on to know all about stamp duty charges, and how a stamp duty calculator can help you.

What is stamp duty?

It is important that your property is legally recognized by the authorities. If, for instance, you run into an ownership dispute regarding your house a few years down the line, it is this legal recognition that will hold in your favour in a court of law. 

The stamp duty is an extension of the same legal requirement. It is a legal tax applied on any sale or purchase of property and acts as physical evidence for the property transaction that had taken place. It is collected on the basis of the property value at the time of registration, and it’s usually paid by the buyer. 

The stamp duty can be accounted for in the housing loan you avail of for your property itself. Levying the stamp duty tax is a concern of the State Government of respective states. Therefore, the stamp duty rates vary state-wise in India. Stamp duty must be paid in full and on time, else it attracts a payment penalty.

Factors that affect stamp duty

Not only do stamp duty rates vary from state to state, but they also vary depending on certain specifics of your property. Since stamp duty value is directly linked to your property value, it is useful to understand these influencing factors.

  • Market Value: The market value of your property, and the area that your property is located in influences your stamp duty rate. Generally, stamp duty cost is around 5-7% of your property value along with 1% registration charges. If your property lies in a well-connected area, chances are your stamp duty charges will be higher too.
  • Type of Property: Whether your property is a house or a shop, the property type will influence your stamp duty costs as well. Stamp duty is relatively higher on commercial property than on residential property.
  • Jurisdiction: Properties that lie in urban areas or municipal localities are charged a higher stamp duty than rural properties that come under panchayat areas. As stamp duty is collected as a percentage of property value, it is natural that urban properties having greater value will attract more stamp duty. For example, in Mumbai, properties that lie within the municipal limits are typically charged a 6% of market value stamp duty, whereas properties that lie in gram panchayat areas usually have only a 3% of market value stamp duty.

How is stamp duty calculated?

The stamp duty calculator breaks down the essentials required to assess your stamp duty value. To use the calculator, you need to enter a few basic details like the value of your property, the state in which your property lies, whether it’s an urban or rural property, the amount of your home loan, and whether you’re a first-time buyer or if you’ve owned or currently own other properties. Based on these specifications, the calculator will give you an indicative value of the stamp duty cost you will be required to pay. Let’s take a few tabular illustrations to understand.

State Property Value Stamp Duty RateStamp Duty Cost
Maharashtra Rs. 50,00,0005%Rs. 2,50,000
Tamil Nadu Rs. 10,00,0007%Rs. 70,000
PunjabRs. 80,00,0006%Rs. 4,80,000

Disclaimer: Figures are indicative, and actual costs may vary

It is also useful to note that stamp duty can be claimed as a tax deduction under Section 80C of the Income Tax Act, up to a limit of Rs.1,50,000. Accounting for the stamp duty and registration costs is essential for availing of a home loan that provides for all costs of your housing. Since property values are always on the higher end, even stamp duty and registration costs tend to run into lakhs. While laying down the specifications of your home loan, it is important that you ensure that you have a separate amount earmarked solely for stamp duty and registration costs.