The government of India levies a tax when there is a transfer of ownership of real estate or property. This tax is referred to as stamp duty. Stamp duty is levied on transactions involving residential property, commercial property and freehold or leasehold properties. It is imposed by states and therefore, the rates will vary from one state to another. Stamp duty is payable as per the provisions of Section 3 of the Indian Stamp Act, 1899. The extent to which the tax amount is payable depends on the value of the house or property during the time of registration. It will further vary depending on the purpose that the property serves and the type of buyer. It must be noted that there are other documents that also require stamp duty. Besides property transactions, stamp duty is levied on shares, debentures, bill of exchange, conveyance deed, hire purchase, promissory note and movable and immovable assets, among others.
The Indian Stamp Act, 1899, is a fiscal statute that lays down the law with relation to the tax levied in the form of stamps on instruments recording transactions. Section 3 of the Act which reads “Instruments chargeable with duty” lists the regulations governing payment of stamp duty.