How much you know about stamp duty?

One of the most important financial decisions you will take in your life is purchasing a house and paying stamp duty is very common practice in purchase dealings. A buyer is responsible for the stamp duty. Always make sure that, in any case, stamp duty should not be bought in the name of a party/person not involved in the document.

What is stamp duty?

Similar to income tax, stamp duty is also a type of tax or duty collected by government for all the transactions made within the state by way of documents. Such documents include all Agreements, Bonds, Powers of Attorney and others. Stamp duty is payable under Section 3 of the Indian Stamp Act, 1899. It has to be paid in complete amount and timely manner. In case of a delay a penalty is charged. Stamp duty is considered as one of the key sources of revenue for every state. After sales tax, stamp duty is the second largest source of revenue For the Maharashtra.

When is the stamp duty payable?

Stamp duty is payable in three situations:

• Before execution of the document

• On the day of execution of document

• On the next working day of executing such a document

Document execution means putting signature on the instrument by the person’s party to the document. Here instrument implies any document by which any right is created, transferred, limited, extended, extinguished or recorded.

Stamp of legality

A proper stamp duty payment done on a document makes it legal. Such document achieves evidentiary value and can be presented as evidence in a court of law if needed. Unstamped or not properly stamped documents cannot be considered as evidence. Generally, it is necessary to stamp all document executed in the state before signing of the document. To pay a stamp duty, one needs to buy a stamp paper, adhesive stamps and finish with rubber-stamping.

Who is liable to pay stamp duty?

Generally, a buyer is responsible for paying the stamp duty in purchase transactions. In the absence of any agreement to the contrary, the purchaser is responsible to pay stamp duty or in case of property exchange, both parties are required to abide stamp duty equally.

Validity of stamp duty

In the state of Maharashtra, from the date of purchase, stamp duty purchase is legal for the period of six month. So it is necessary to execute the document within a period of six month of any stamp duty purchase. This validity period may differ from state to state.