What is the extent of application of the Bombay Stamp Act, 1958?

The Act applies to the whole of the State of Maharashtra.

What is an “instrument” under the Act?

The term ‘Instrument’ refers to 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, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt.

What does “market value’’ refer to?

Market value, in relation to any property which is the subject matter of an instrument, is the price which such property would have fetched if sold in the open market on the date of execution of such instrument, or the consideration mentioned in the instrument, whichever is higher. The price which such property would have fetched if sold in the open market is determined on the basis of the ‘Ready Reckoner’ issued each year by the State Government. Depreciation in stamp duty is available for old buildings and buildings without lift.

When is stamp duty payable on an instrument in Maharashtra?

All instrument are liable to be stamped before or at the time of execution of instrument or immediately thereafter on the next working day following the date of execution, when executed in the State of Maharashtra . Any instrument executed outside the state is liable to duty only on receipt of such instrument in the state, provided it relates to a property situated in the state, or a matter or thing to be done in the state. Stamp duty is not levied on a transaction, but on an instrument.

What is the rate at which stamp duty is payable?

It is payable at the rate mentioned in the Amendment Act, 2004 of the Bombay Stamp Act, 1958. For the current rate, please check with the latest Ready Reckoner issued as on the 1st of the current year.

Which documents must be registered?

All of the documents listed in Section 17 of the Indian Registration Act, 1908 need to be registered. Registration of documents listed in Section 18 of the Indian Registration Act, 1908 is optional.

Should an Leave and License agreement also be registered?

An agreement for ‘leave and license’ is required to be compulsorily registered under the Maharashtra Rent Control Act, 1999.

Does the document registration come with a time limit?

Yes, the documents must be registered within 4 months of the date of execution. After which, documents can be registered within the next 4 months on payment of penalty.

Who pays the stamp duty and registration fee on purchase or lease of a flat or office?

The purchaser (whether on first sale from a developer or on resale of a flat/ commercial property), or the lessee of a flat or office is required to pay stamp duty and registration fee.

How is stamp duty paid in Maharashtra?

Stamp duty above the value of Rs. 25,000 is payable by a pay order/ demand draft/cheque which must be drawn in favour of “The Superintendent of Stamps, Mumbai”. Alternatively, a pay order can be drawn in favour of “The Reserve Bank of India- A/c Stamp Duty, Mumbai”. The original instrument is then franked with the value of the stamp duty. Adhesive stamps are no longer used in Mumbai city.

Stamp Duty up to the value of Rs. 25,000 can be paid in cash. A receipt is issued by the concerned office for the stamp duty amount.

What is the procedure for registration of an instrument?

Once adequate stamp duty is affixed on an instrument and it is dated and signed by the parties, and attested (where required) by witnesses, it can be lodged for registration after payment of the registration fee.

All parties signing the instrument are required to attend the office of the concerned Sub Registrar of Assurances either by themselves or through their constituted attorney under a power of attorney to admit execution of the instrument.

A passport-size photograph, original power of attorney, personal identification such as passport or income tax PAN Card, adequate Xerox copies of the original instrument are some of the essentials required for registration.

After lodging an instrument, it is registered and seal of the Sub Registrar is affixed on the instrument, thereafter the original instrument is returned back to the parties.

Is a Witness required at the time of Registration of a Property?

Yes. Two witness with valid documents of proof of identity are required to be present at the time of Registration of the document on behalf of the Buyer/ Seller.

Are there restrictions on the name in which the stamp paper must be purchased?

Yes and that’s why the stamp paper should be purchased in the name of one of the parties who is to sign the instrument.

What are the penalties for non-payment of the requisite stamp duty?

Previously, the penalty was an amount not exceeding 10 times the amount of the proper duty. As per the recent amendments, a penalty of 2% per month on the proper duty for the period of default will be levied, subject to a maximum of twice the deficient portion of duty. Also, instruments are liable to be impounded until the proper stamp duty is paid.

What are the consequences for not paying stamp duty on an instrument?

In case of such an occurrence, the instrument becomes inadmissible as evidence.

Is it possible to get a refund of stamp duty already paid on an instrument?

Yes. If stamp duty is paid on an instrument but the instrument is not signed by any party, then an application is to be made within 6 months of the date of purchase of the stamp paper, to the concerned authorities for refund of stamp duty. The original stamp paper is returned along with the application. On receipt of such application, the concerned authorities are empowered to refund the value of stamp duty after deducting such amounts as may be prescribed.

Is stamp duty payable on a gift or on the resale of a flat?

Stamp duty is payable on instrument of gift or resale of a flat.

When can an instrument be impounded?

When an instrument is presented for registration and the concerned authorities have reasons to believe that an instrument does not reflect the true market value and they can take steps for recovery of the stamp duty including impounding of instruments. If the collector determines that the proper stamp duty has not been paid then a penalty can be levied on such instruments.

Is there a procedure for adjudication of stamp duty?

A person can seek the opinion of the Collector of Stamps by making an application to her/him for the adjudication of stamp duty payable by the applicant on the instrument. For this purpose, the person who is a party to the instrument has to furnish a true copy of the instrument and an affidavit stating the facts and such other evidences as required, along with prescribed fee. The Collector’s opinion is final and conclusive. No appeal lies against her/his order of adjudication.

Can a person grant a Power Of Attorney for the purpose of signing and registering the instrument?

In fact, persons residing abroad or who travel frequently are advised to grant Power Of Attorneys to facilitate better management of their flats.

Can a person grant a Power Of Attorney for registering instruments?

Yes, but the Power Of Attorney must be registered before the Sub-Registrar of Assurances. In case of NRI, the POA must be signed in the Indian Consulate and adjudicated at the local Collector office.

Is the agreement for the sale of a flat/shop/office required to be stamped and registered?

This requirement exists as per prevalent law.

Provision on tax on Capital Gains

What is the provision on tax of capital gains arising out of transfer of a house?

The Income Tax Act contains specific provisions on tax of capital gains arising out of transfer of a house. Capital gain tax is leviable on sale or transfer of a house. What constitutes a sale and transfer has been specified under the Income Tax Act. The capital gains tax is computed on the indexed cost of the house sold, which is deducted from the amount received by the assessee. The indexed cost is computed according to the indexation rates notified by the Income Tax Department for each year.

Who is eligible for concessions on capital gains tax?

A seller of property can reduce the capital gains tax by complying with the provisions specified under the Act. The benefit is available only to individuals and to a Hindu Undivided Family. No other category of assesses are eligible for the concessions.

When is one eligible from exemption of capital gains tax?

The asset transferred should be a residential building including land attached to it. Further, any income from the house should be chargeable to tax under the head ‘Income from House Property’. Other types of properties are not eligible for this exemption. The capital gains should arise from the transfer of a long-term capital asset. The house must be held for a period of more than 36 months before the date of sale or transfer. It may be self-occupied or rented out.

What should one do to avoid paying tax in capital gains?

In order to avoid being liable to pay capital gains tax, an assessee should have either purchased a house within one year of the sale or should do so within two years after the date on which the transfer took place, or construct a house within a period of three years after the date of transfer. In these cases instead of the capital gains being charged to income tax as income of the previous year in which the transfer took place, it will be dealt in accordance with the specified provisions.

If the capital is more than how is it computed?

In case the amount of capital gains is greater than the cost of the new house purchased or constructed, the difference between the capital gains and the cost of the new house is charged as income of the previous year. In case the new house is sold within a period of three years of its purchase or construction, for the purpose of computing capital gains in respect of the new house, the cost will be nil. If the capital gains is less than the cost of new house, how is it computed? In case the amount of capital gains is equal to or less than the cost of the new house, it will not be charged to tax at all. In case the new house is sold within a period of three years of its purchase or construction, for the purpose of computing capital gains in respect of the new house, the cost will be reduced by the amount of the capital gains.

When should the amount be deposited?

Any amount of the capital gains which was not appropriated by an assessee towards the purchase of a new house within one year before the date of transfer of the original house,or which is not used by him for the purchase or construction of a new house before the date of furnishing his returns of income, should be deposited in specified bank accounts. The amount should be deposited before the due date of filing income tax returns.

The amount can be used in accordance with any scheme the central government may frame. The proof of such deposit should be attached with the income tax returns. The amount already used by an assessee for the purpose of purchase or construction of a new house together with the amount deposited will be deemed to be the cost of the new house.

In case the amount deposited is not used fully or partly for the purchase or construction of a new house within the period specified, the unused amount will be charged as income of the previous year in which the period of three years from the date of transfer of the house expires.

An assessee will be entitled to withdraw the amount in accordance with the provisions of the scheme.