This Is What Happens When You Evade Stamp Duty

An intelligent homebuyer tries every trick in the book to bring down the cost of his purchase — from negotiating with cost the seller to haggling with banks in order to get a cheaper home loan. In this process, a buyer might, however, go a little far if they attempt to evade stamp duty payments, the cost one has to pay to the government at the time of registration.  In India, states levy this duty, and charge between 4 and 10 per cent of the deal value as stamp duty. Additionally, a buyer has to pay one per cent of the property value as registration charge.

Put together, these two duties significantly jack up the cost of house purchases. This might lead to buyers adopting insincere methods to avoid the charge. Instances of homebuyers lowering the deal value on papers to evade stamp duty are not uncommon in India, a practice that can actually land them in trouble. While laws related to this offence are different in every state, the Indian Stamps Act, 1899, that happens to be a Central legislation, lays that an evader may be penalised monetarily. Serious offenders may have to serve a jail term of up to one year.

States such as Bihar, Kerala, Odisha and Assam follow the national law as far as the penalty on stamp evasion goes.

In these states, for an evasion of up to Rs 10 lakh, the offender may have to pay a penalty between Rs 50,000, or 20 per cent of evasion amount, whichever is more. If the evaded amount is more than Rs 10 lakh, the punishment will involve imprisonment of up to one year or a fine of at least Rs 50,000, or both.

States such as Maharashtra, Delhi and Karnataka have their personal laws in this regard.

How to save stamp duty tax?

Stamp duty evasion is an illegal act and it can jeopardize your entire purchase. Could you possibly lower this monetary liability in a legal manner? The answer is, you sure can! 

Realtors launching festive offers that include “no stamp duty payment” option have been a common practice. Today, a buyer does not have to wait for the festival season to strike that sort of a deal. Struggling with huge unsold inventory and in desperate need to sell, real estate developers offer such deals all years around.

Another great way to save on stamp duty is to register the property in the name of a woman. Almost all states in the country charge between one or two percentage point less as stamp duty from women. In some states, in fact, women do not have to pay stamp duty on property purchase. In Jharkhand, for instance, women have to pay only a token amount of Re 1 as stamp duty. In Jammu, women homebuyers don’t have to pay any stamp duty.

Unlike earlier, banks now factor in stamp duty charges while granting home loans. This means your bank will calculate this “additional” charge as part of the deal and grant you the loan accordingly. This means the buyer does not have to struggle to arrange the stamp duty amount.

With inputs from Sneha Sharon Mammen