How to Save Stamp Duty & Registration Charges

How to save stamp duty and registration charges is a tricky question. Before discussing the same, lets understand what is stamp duty. According to wikipedia, Stamp Duty is a tax that is levied on documents. At the time of transferring ownership of property i.e. Registering Sale Deed, the buyer need to pay stamp duty & registration charges to Govt. The Stamp duty and Registration Charges vary from state to state. Some states offer discount on Stamp Duty e.g. if the property is registered in the name of a woman then you can save stamp duty. In Delhi stamp duty to be paid is 6% but if the property is registered in the name of a woman then stamp duty to be paid is 4% of Total Sale Deed value. Thus you will save stamp duty to the extent of 2% of Sale Deed Value. For the benefit of readers, I am listing down the current stamp duty charges in various states. These charges are indicative and may change. Also some state govt levy different stamp duty charges for different areas like urban & rural.

Chandigarh: 0%

Gujarat: 3.5%

Uttarakhand: 4%

AP, J&K, Punjab, Haryana: 5%

Delhi, UP, Bihar, Jharkhand, West Bengal, Sikkim & All NE States: 6%

Maharashtra, Karnataka, Kerala, Goa, Odisha: 7%

Chhatisgarh: 7.5%

Rajasthan, MP, TN & Himachal Pradesh: 8%

It is mandatory to pay stamp duty as per the stamp duty valuation fixed by the Registrar of your area under the stamp duty act of your state. Registration Charges are over & above Stamp Duty and is levied @ 1% of Total Property Value as per sale deed. Now lets understand how to save stamp duty and Registration charges with the help of following example.

Mr A is buying a 1000 sq ft flat in Delhi for Rs 1 Cr. Here 1 Cr is Market value of the flat. Now the sale agreement should be executed for total amount i.e. 1 Cr but you can save stamp duty by registering the property at circle rate or govt guidance value. Circle Rate or Govt Guidance Value is the minimum value at which the property can be registered. In laymen terms Govt Guidance Value or Circle Rate is the market value of property as per State Govt. It is always lower then the existing market value of property. In this example, Circle Rate or Govt Guidance value is Rs 6500 psf therefore according to Govt the Circle Rate or Govt Guidance Value of the property is 65 Lacs whereas actual market value is 1 Cr.

By registering the property at Circle Rate or Guidance value you can save substantial amount in stamp duty & registration charges. If you register the property @ 1 Cr then you will be paying 6 lac as stamp duty & 1 Lac as Registration charges in Delhi therefore total payout is 7 lac for registration.

In order to save stamp duty, you decided to pay stamp duty and registration charges @ Guidance Value or Circle Rate then you will register the property @ 67 Lacs (65 Lacs as Circle Rate + 2 Lac for Car Parking). It is mandatory to include Car Parking charges in Circle Rate or Guidance Value to arrive at final registration value. Therefore stamp duty to be paid is  4.02 Lac and Registration Charges of 0.67 Lacs. Total Payout is 4.69 Lacs.

Total saving on stamp duty and registration charges in this case is equal to 7 Lac – 4.69 Lac = 2.31 Lac.

Now 2 big questions, to save stamp duty you will register the property at guidance value or circle rate but (a) How to convince the Seller for same & (b) How will you show the transaction of balance 33 Lacs i.e. 1 Cr – 67 Lacs.

Answer is if the seller agree to register property at Guidance Value or Circle Rate then he will save on Capital Gain Tax therefore he will not mind registering property at circle rate or guidance value. Regarding transaction of balance 33 Lacs, as the Sale agreement is signed for 1 Cr & property is registered for 67 lacs. Buyer can sign another agreement with seller which is called Deed of Transfer of Rights (DOTOR). Balance transaction of 33 Lacs can be shown in DOTOR, which will complete the financial transaction. I will discuss about DOTOR in more detail in my next article.

The only flip side of registering property at Guidance Value / Circle Rate to save stamp duty is that some Home Loan Providers like SBI will only provide Home Loan of upto 80% of Sale Deed Value not the Sale Value e.g. In this case if buyer avail home loan from SBI then SBI will provide maximum loan of 53.6 Lac i.e. 80% of 67 Lacs (excluding stamp duty & registration charges). Whereas in case of other lenders like HDFC, loan will be 80% of Sale Agreement Value i.e. 80% of 1 Cr = 80 Lacs as Home Loan.

This method to save stamp duty is very much legal and you can save good amount of money for your home furnishing :). Hope you liked this post. Please share your inputs/feedback through following comments section.

Copyright © 2011-2013 Nitin Bhatia. All Rights Reserved.

About the Author Nitin Bhatia (159 Posts)

I am a Blogger, Credit Counselor, Reviewer and Author of write ups on Real Estate, Personal Finance, Financial Planning, Home Loans, Marketing & Current Affairs. I write blogs for leading web portals in India.


  • Jagan Tarigoppula

    Really good article. Keep publishing such informative as well as money saving articles.

    • Haresh

      Dear nitin,

      • haresh

        apologize for not posting the message. Can you please elobarate any issues in registering a plot with some activity happened on the plot, than registering it as semi finished?

        LIC is offering a loan even if the plot is registered inspite of some construction activity happened on the land, where as SBI is offering only on semi finished registration document only. But with LIC offer, substantial amount of registration amount is been saved, can you please elobarate any hidden/known issues regarding this, my personal opinion is how can they register as plot when some construction activity happened?

        also how is LIC HFL loan, if I wanted to make extra payments every month other than the EMI compared to SBI, presently I have loan with SBI and I’m very much satisfied with SBI transperancy.

        • http://www.nitinbhatia.in/ Nitin Bhatia

          Legally, i will not suggest to register it as a plot.

          If construction activity is going on and you register as a plot then construction activity will be considered as encroachment. I can’t comment on any hidden issues without going through property documents but just to save some amount in stamp duty, i will not suggest to register as a plot.

          Personally i will not recommend to transfer your loan from SBI from LICHFL.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Thanks for liking the post & sharing your feedback. Happy Reading :)

  • Kamlesh Kumar

    Dear Sir,
    Very good idea to save on stamp duty and registration charges but what if the deal is for investment purpose only.
    In case we are selling the same property within three years, if appreciated good enough, diff will be noted as short term capital gain which will attract huge tax.
    In case it is for residence purpose there is no harm in registering at govt circle rate.
    I have seen in smaller cities like kanpur, plots at outskirts areas are still avaiable at almost same rate as circle rate set by govt. Even in case someone can negotaite and do plenty of research he can get a lower price.
    Regards,
    Kamlesh

    • http://www.nitinbhatia.in/ Nitin Bhatia

      I agree that Govt is trying to match the Circle Rate and Market value but only in very limited/few pockets specially in outskirts where land acquired is a agriculture land. There is a political compulsion to match circle rate and market rate so that farmers get best rates for their land.

      If both sale and purchase registrations are done at Circle rate then capital gain tax loss will be taken care :) I agree if purchase registration is at circle rate and sale registration is at market value then it will attract huge capital gain tax.

  • Deb

    Hi Nitin,

    Need some advice. I’m buying a property/Flat at Bangalore which cost me Total 36Lacs and I’m taking a Loan from SBI. Now the question is SBI mentioned Property should be registered as per the value indicated in the agreement. Now my builder response if we register as per the agreement value ( which is 36 Lacs) then I need to pay another 1 lac for Registration, where as If SBI are willing to register as per Guideline value, then I’m closing the deal in 36 Lacs. Please advice what are advantage and disadvantage..

    • http://www.nitinbhatia.in/ Nitin Bhatia

      You have not mentioned Guidance value in your query, i am assuming it to be 30 Lacs.

      Now It depends how much loan you need. SBI will sanction the loan on Registration value not on agreement value. Its a catch 22 situation. If agreement and Registration value is same i.e. 36 Lacs than you need to pay high Registration charges at the same time your loan sanctioned will be high i.e. 80% of 36 Lacs.

      If you go for registration at Govt Guidance value than you will be saving on Registration charges but your loan sanctioned will be 80% of 30 lacs.

      Depending on your loan requirement, you may take a call. As i mentioned in my post that Its perfectly OK & legal to register property at Govt Guidance value instead of Agreement Value.

      • Deb

        Thanks for your advise Nitin. I have taken 25 Lacs loan from SBI which is sanctioned last week :) and rest 11 Lacs I’m paying from my pocket. The guidance value of the property is 1350 Rs per sf/ft and my sales agreement value is 6,54000/-. Now I understand from the bank that property has to be registered as per the value indicated in the sales agreement and the value would be around 17Lacs for 1189 sq/Ft area… In this situation will I be paying anything extra/ more than 36L?

        • http://www.nitinbhatia.in/ Nitin Bhatia

          You need to check who will pay stamp duty and registration charges. In normal scenario it is borne by the buyer i.e. you need to pay this cost or is it mentioned in your cost breakup sheet with builder.

          Besides this you need to check whether VAT and ST is included in your agreement with builder or it is also additional. I don’t think so you need to pay anything else besides these 2 components.

  • Samara

    Hi Nitin

    This is fantastic thread but i have a question for you. I am looking for a property of market value 1 Crore while Guidance value is 45 L. Seller is OK to just accept Guidance value on Sale Deed. Now my problem is how will private banks issue loan (for amount say 70 L) if my Sale Agreement shows only 45L. My assumption is bank must be given Sale Agreement document & they record this for legal purposes as well as auditing of house loan. So how is this possible ? This also leads to me to ask questions like

    1. Could we make 2 sale agreements ? One for registration and another for bank loan.

    2. Will banks validate that Sale deed should be registered with same pricing as what we showed them in Sale Agreement ?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Sale Agreement & Sale Deed can be 2 different documents. Private banks consider Sale Agreement Value for Loan eligibility and PSU banks like SBI consider Sale Deed Value. You need not to register Sale Agreement with Registrar but Sale Deed must be registered. You can execute Sale Agreement of 1 Cr and your loan will be approved based on this agreement. You can execute Sale Deed at 45 Lacs. This arrangement will solve your problem.

      1. You will not execute 2 sale agreements but 1 sale agreement and another sale deed. I have explained this in 1st para. I will not suggest to execute 2 Sale Agreements of different value as it will put you in legal trouble.

      2. No, Banks are not particular on this point. Only imp point to note is that Home Loan eligibility is decided based on Sale Deed Value by PSU bank and in case of Pvt Banks Sale Agreement value is considered for loan eligibility (It is not applicable for all).

      • Samara

        Thanks for response but won’t this cause below 2 issues

        1. Pvt banks issue loan using 1 Cr (& ofcourse based on their valuation) using Sale Agreement document which itself is not a govt registered document. Also in this case , assuming bank gives the check in the name of Seller , i assume Seller will be at loss as this whole of money becomes white now via Bank Check

        2. Isn’t this case (where i took more loan on Sale Agreement but registered for lesser which mean less taxes to govt) cause tax evasion from govt. perspective ?

        • http://www.nitinbhatia.in/ Nitin Bhatia

          1. Sale Agreement will be executed on stamp paper of 0.1% of Loan Amount i.e. for 1 Cr Home Loan, your Sale Agreement will be executed on Rs 10,000 stamp paper. If the Home Loan requirement is 1 Cr than entire money will be in white only.
          2. Govt tries to match Guidance Value/Circle Rate with Market value. It is perfectly legal and fine to pay stamp duty @ Guidance Value/Circle Rate. The stamp duty is paid for basic structure i.e. bare shell house but house might be furnished and comes with other amenities in case of flat. Don’t worry on this part. You can pay stamp duty at Govt Guidance value/Circle rate.

          • Samara

            Thanks Nitin.

            On #2 , would that work even for a plot ? Plot’s guidance value is 45L and Market Value is 1Cr. I am looking for a loan from banks for 60L. How much should my Sale Agreement & Sale Deed (This drives the stamp duty and fees i pay to govt) be ?

            • http://www.nitinbhatia.in/ Nitin Bhatia

              Yes, its applicable for plots also. As i mentioned in previous comments pls let me know from which Bank/HFC you are planning to avail loan as rules are different for PSU banks and HFC. Bank will give you loan on lowest of Sale Agreement value or Sale Deed value. Ideally both should be same if you are availing loan from PSU bank whereas in HFC’s, these values can be different and you can get loan on Sale Agreement value though Sale Deed value can be Govt Guidance Value.

              • Sreenath

                Nitin

                I am planning to buy a plot & looking to consider banks where pre-payment charges are zero. I am considering Bank of Baroda & Axis Bank. How does these banks function wrt Sale Agreement & Sale Deed value.

                Also does banks offer home loan for buying a plot ?

                • http://www.nitinbhatia.in/ Nitin Bhatia

                  As per my understanding BoB will approve loan based on Sale Deed Value and Axis Bank will consider Sale Agreement Value. You need to check with banks as they have different criterion depending on project.

                  HFC’s provide loan for buying a plot but banks are providing composite loans i.e. for buying and construction. The products keep changing from time to time. Request you to check with banks regarding the same.

  • Samir

    Nitin, Excellent article. A derivative question which arises is this:

    Lets say the sale agreement value is 60 Lacs and sale deed value 45 lacs.

    Do I need to deduct TDS (section 194) since sale deed value is 45 lacs ? What is taken into account as consideration value for deducting TDS under the newly introduced section 194 ? Sale agreement or sale deed value ?

    Thanks.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      For the purpose of deducting TDS, Total Sale Agreement value will be considered i.e. 60 lacs in your case.

      • Samir

        Thanks a lot Nitin.

        • Sreenath

          Nitin – If my sale agreement is not visible to Register office or Tax bodies , what enforces us to pay TDS based on Sale Agreement ? What if i chose to pay TDS based on Sale Deed value ?

          Secondly – Will Sub registrar / Registration office enforce us to show the TDS receipt before registering it ? Or its not their job to mandate that.

          • http://www.nitinbhatia.in/ Nitin Bhatia

            Though Sale Agreement is not visible but total transaction value is visible to everyone and TDS is on total transaction value therefore TDS is on Sale Agreement Value if it is higher than Sale Deed Value

            Sub-Registrar office is not bothered about TDS as it is tax liability of buyer. TDS is sole responsibility of buyer and should be deposited within 7 days from the end of month in which TDS is deducted therefore TDS can be deposited after registration if you are receiving payment at the time of registration.

  • Neeraj Patil

    Hello Nitin,
    To share a point:
    In my case, i have gone for Home Loan with SBI.
    Total value of of property (Apt) is 60 lakhs. (including reg)
    Bank has asked for 2 docs (Construction agreement & Agreement of Sale)
    Agreement of sale is : 40 lakhs
    Construction cost is : 17 lakhs.
    Registration charges will be applied only to Agreement of sale amount i.e 40 lakhs.

    Bank has agreed to disburse the loan (80%) of the total amount i.e 60%.

    As you have mentioned that PSUs disburse 80% on the Sale Agreement.
    Can you pls clarify if your words are based on older procedures being followed up by PSU or recent updates?

    Thanks!
    Neeraj.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Just to correct PSUs disburse 80% of the Sale Agreement or Sale deed Value whichever is lowest. Ideally both should be same.

      Rules are different for under-construction and re-sale property. For under-construction property, disbursement is on total amount as rule says that construction cost is not included in the registration. Stamp duty is paid only on Agreement to sale but banks consider construction cost for loan if the buyer has signed agreement to build with builder i.e. builder is constructing the house on buyers behalf. In under-construction property by default sale deed value and sale agreement value are same.

      For resale there is no construction cost therefore stamp duty should be paid on total sale consideration but there is guidance value which is fair value of property as per Govt therefore in re-sale property, sale deed value is considered as sale value therefore PSU banks disburse only 80% of sale deed value i.e. what you are reporting to Govt. Actual sale might be at higher value.

      • Neeraj Patil

        thank you for clarifying the difference.

  • Priyankur Saha

    Thanks for this wonderful article.
    I am currently in this Catch 22 condition as I am planning for loan from SBI.
    I am looking for a flat of 1085 SqFt with market value of 3150/sqft and guidance value of 3070/sqft. Additionally, I need to pay 350000 for car park and amenities, 190000 for Electric and Water connection, 8.6% of Tax. Could you please tell how much loan can I get from SBI?
    Builder informed that SBI will provide loan for 80% of (1085*3070)+350000.
    But, I will be paying (1085*3150)+350000+190000, which is almost 43L except registration and stamp value.
    Does it mean that I will be paying more from my pocket in case I go with the SBI loan??
    Thanks.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      You will be paying extra from your pocket to the extent of {3150-3070}*1085 = Rs 86800. Anyways no bank or HFC will finance 1.9 Lac for Electric & Water connection + VAT or ST (these components you need to arrange on your own).

  • Rohit

    Hi Nitin,

    Need some advice.I have purchased a Flat at Bangalore which cost me Total 37Lacs and have taken a Loan(25 Lacs) from SBI. Now the question is SBI mentioned Property should be registered as per the value indicated in the agreement. I will be paying 1 Lac extra if I go through SBI rule, and if I register through guidance value (i.e 1800/sft) then I will save at least 1 lac for Registration, is there any way, can go for guidance value registration?

    Please note 37lacs includes VAT+ST.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      For under construction property, 2 agreements are executed with builder i.e. Agreement to Build and Agreement to Sale. Total Value of Property equals to sum value in these agreements. Property is registered as per value in Agreement to Sale & this amount is normally as per Guidance Value.

      It seems in your case agreement to build is not executed with builder i.e. based on 1 agreement entire transaction is being executed. In short, you need to break the total cost into 2 parts so that you get loan on total value but the registration should be done as per Agreement to Sale (at guidance value). Please discuss with your builder.

  • Anil

    hey Nitin,

    I would like to say thanks to this wonderful post and very informative, precise and clear details.

    great work, great content.

    Keep up the good work which helps many land/property/house buyers.

    Thanks
    Anil S

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Thanks for liking the blog. Keep Reading !!!

      • Anil

        Hi Nitin,

        I was thinking over, what benefit does the seller have.

        Lets consider an example of 1 cr house for resale,

        1. i will make an Agreement of 20L (20% of total to get loan of 80%)
        2. then i will do registeration and stamp duty at Govt Guidance value which is say 60Lac(for a 1 Cr property)
        3. so buyer makes profit on lower value

        so my queries are as folows:

        1. will seller be taxed (Capital Gains)on Final Sale Deed (which shows actuals ie 1Cr) Or he will be taxed for the amount on registration.

        if its amount on registration then how will he justify the 1 Cr in his account after deal is done.

        2. Also, while we do Stamp Duty and Registration, do we do weneed to show Sale Agreement (which has 20Lac mentioned) or will the officer ask for Final Sale Deed (which will mention entire amount 1Cr) Or the Registration office dont look for Agreement or Sale Deed Amounts(or they dont even ask for these)

        Thanks in Advance

        Anil S.

        • http://www.nitinbhatia.in/ Nitin Bhatia

          The sale agreement value will be 1 Cr and sale deed value will be 60 Lacs.
          1. Seller will be taxed on Registration amount i.e. 60 Lacs (Sale Deed Value). You can make Deed of Transfer of Rights for the rest amount i.e. 40 Lacs. Click on following link

          http://www.nitinbhatia.in/real-estate/deed-of-transfer-of-rights/

          2. Registrar office is not concerned about Sale Agreement value and will not ask for same. Tell your lawyer to put intelligently in sale deed that you have paid rest 40 lacs for Home furnishing etc.

  • shrikantg

    I have completed the registration of my flat in a co-operative hsg society in Pune, in 2005. Under amenities the builder has provided us a gymnasium in a flat in the building. Now the society has applied for conveyance of the property with the local authorities. The authorities are asking the society members to pay stamp duty and registration for the gymnasium. Are common areas liable for stamp duty?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      No, Society members are not liable to pay any stamp duty on common area. It is builders fault that he has not declared the Gymnasium in Master Plan and evaded stamp duty on same. Any additional stamp duty for the property should be borne by the builder not by society members.

  • ag

    Dear Sir,

    i am buying a flat a resale flat in maharashtra
    property age is 7 months (from date of possession)
    will it be possible to get the discount in stamp duty, as property transaction is resale type?

    waiting for reply

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Stamp duty is paid as per Govt Guidance Value / Circle Rate therefore discount is not feasible even if it is resale.

      • ag

        thanks sir,
        i have few queries related to that
        i am doing the things as per above article, only DOTOR is pending
        1) whether in registration fee, can we get such type of benefit?
        2) i have seen the first owners agreement with builder, it specify the car parking, but registration document won’t mention it exclusively
        they are having separate allotment letter from builder for parking allotment
        what should i do in this case?

        • http://www.nitinbhatia.in/ Nitin Bhatia

          1. The benefit is available for both stamp duty and registeration fees.
          2. Any car parking allocated by association/builder to 1st owner should be mentioned in sale deed else you cannot claim it in future. Though he cannot sell the same but since it is allocated to him therefore he has to legally transfer exclusive car parking rights in your name by mentioning it in sale deed. You should also mention car parking no in sale deed to identify your parking space.

  • Brijesh bhatt

    Dear Sir,,

    I booked one flat in vadodara gujarat. Builder ace octve..Now flat is ready.

    He is saying that for dastavej i have to pay him 47000 rs….

    My flat cost is 20 lack rs.. Sir i am not understanding why this much less amount they are taking..

    I asked to builder then he replied to me this is under construction so only 47000.. if u pay once site complate then u have to pay nearly 1.25 to

    1.5 lakh..

    Sir this issue i am not understaning..

    I am stying in kuwait outside india..

    When i asked him… i have come there for dastavej .. so he replied no need to come…. just sign papers which he sent me..

    I asked him no need my photo to take in goverment office ?? then he replied no need.. only seller should be there.. no need buyer..

    Sir pls give your best advise to me.

    brijesh bhatt

  • http://www.nitinbhatia.in/ Nitin Bhatia

    Dastavej is nothing but agreement to sale/sale deed. Dastavej fees in Gujarat is 6% therefore you need to pay only Rs 12000 on 20 Lac. You may check with builder why he is asking more.

  • DD

    Dear Sir the vendor and purchaser have entered into Articles of Agreement in respect of a property (certain constructed area), the plan for which is yet to be sanctioned. The Parties entered into another separate Articles of Agreement for additional amenities. Stamp Duty is paid on Agreement for constructed area which is registered. Both the documents are cancelled by the parties by two separate Cancellation Deeds, before the plan could be sanctioned. Now the Stamp authorities are claiming Stamp Duty on Agreement for additional amenities,which is unregistered. How to convince the authority that the stamp is not required?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Stamp duty is paid at the time of registration. If the amenities are not constructed & not registered than stamp authorities cannot demand stamp duty for non existent structure i.e. for amenities.

      As i understand correctly, stamp authorities are not asking for stamp duty on amenities but for vacant piece on which amenities will be build. If you have a property partially constructed and partially vacant than you cannot register only constructed area. The whole parcel of land + constructed area is referred as survey no should be registered and stamp duty should be paid. The stamp duty is paid for entire piece/survey no to stamp authorities. In your case, you have registered constructed area but not paid stamp duty for vacant land. It is different matter that later you can construct additional amenities on vacant piece & get it registered separately.

  • shyamal pal

    sir,
    i have purchased a flat at 34 lakhs but govt valuation is 24 lakhs.can i register my flat at govt value?

  • Kapil

    Dear Nitin,

    I have purchased a property of total value 78 Lakhs and executed an agreement with builder.

    I have following two queries -

    1. If I pay 1% TDS on all payments to the builder and declare the actual property value onto form 26QB, then in future will I be bound to register the property on declared value?

    2. Guidance value might come less than 50 Lakhs (not sure), so can i avoid TDS payment?

    3. On property loan from Bank, will bank deduct 1% TDS on all dispersement?

    Thanks.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      1. No, you can register property at Govt Guidance value. TDS under section 194IA has nothing to do with property registration.
      2. No, TDS is paid on total sale/consideration value.
      3. You need to check with bank. Some banks deduct TDS but it is buyer’s responsibility to deduct TDS if bank is not deducting.

  • DD

    Thanks Sir…

  • priya

    Hi Sir,
    I have acquired a property from my father and now have given the same for reconstruction with the agreement to construct g+3 building. In return I will get 45% share by the way of flat in 1st floor and 2 parking space and for the remaining area in the 45% share I will get cash.
    now my problem is that I want to know Few of the tax implications like:
    1) When will my Capital Gain Tax arise?
    2) How will I calculate FVC? will FVC be only the cash portion which I received?

    Thanks

    • http://www.nitinbhatia.in/ Nitin Bhatia

      1. Capital Gain Tax arise at the time of Sale of any asset

      2. FVC or Full Value Consideration is total consideration for the sale of asset / property. It can cash or kind or both in exchange of an asset/property. In your case, it is both i.e. in kind and in cash.

      In case of exchange of an asset, for calculating Capital Gain you need to find Fair Market Value of the asset / property (granted in exchange).

  • AV

    Nitin, thanks for the excellent, informative post!

    We are evaluating purchase of an existing flat in Bangalore for 60 lacs. The guidance value for the property is around 32 lacs. The builder is requesting payment of roughly 40 lacs to an assignor, and 20 lacs payable to him (the builder.

    Are these payments subject to TDS even though I am not paying any single party more than 50 lacs?

    Secondly, should I be worried that builder wants me to split the payment in this manner i.e. between him and an asssignor who originally purchased the flat?

    Finally, at some point in the future when i go to sell the flat will the value shown in the DOTOR (60 lacs) be used as the cost basis for calculating capital gains,,, even though the property was registered for GV of 32 lacs.

    Thanks… And I look forward to your future posts.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Transfer fees to be paid to the builder is normally Rs 150 to Rs 200 per square feet. I am sorry to say this but Builder is fooling both buyer and seller.

      Irrespective of break up of payment, your transaction value is more than 50 Lacs therefore TDS is applicable.

      Split payment is not an issue provided its through cheque/DD and builder issue payment receipt for same. Secondly, it is clear in payment receipts for what the payment is being made to the builder.

      DOTOR is just a way to save Stamp Duty. it will be considered as cost to acquire property as total transaction value will include amount paid through DOTOR thus will help in reducing capital gain tax in future :)

  • RV

    Could you clarify if Stamp Duty on apartments is based on Market Value OR if the Government is satisfied if the duty is calculated on the Guidance Value even if the price paid is much higher. Is it any different for re-sale of apartments versus property developer selling to the first buyer?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      It is legally ok to pay stamp duty on Govt Guidance value.

      Stamp duty Rule is different for under-construction and re-sale property. For under-construction property, construction cost is not included in the registration therefore Stamp duty is paid only on Agreement to Sale / Sell with the builder. There is no stamp duty on Agreement to Build.

      For resale there is no construction cost therefore stamp duty should be paid on total sale consideration. The guidance value which is fair value of property as per Govt therefore in re-sale property, registration can be done at Govt Guidance value also.

  • Naresh Thakur

    In case of Builder allotting some flats to Land Owner ( Legal Heir ) towards agreed proceeds, is it necessary to registered those flats also ?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Yes, Builder allotment to Land owner is in kind in lieu of Land given by Land owner. It is mandatory to register the flat in your name.

  • ashish kumar

    Dear Sir,
    I have been reading your excellent posts on property related topics and today I have got a query
    I have selected a land for home construction in Lucknow, agreed price is 81 Lakh. Circle rate of the land is 35 Lakh.
    Now the issue is fund management, I have 35 Lakh available and need to take home loan for rest.
    Kindly answer the following
    1. Can I declare correct agreement value to the bank to get 50 Lakh loan and still pay stamp duty on circle rate of 35 Lakh
    2. Bank will transfer the money to whose account, mine or the current owner ?
    3. I am going with SBI, will they give me loan on circle rate or agreed rate?

    Please recommend me how should I manage the funds

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Answer to your queries
      1. YES
      2. Current Owner
      3. SBI will give loan on Sale deed value i.e. circle rate (If you decide to register property at circle rate to save stamp duty). In short you cannot avail loan from SBI if you are planning to register property at circle rate.

  • Blany Rosario

    Hi Nitin,

    I am planning to buy a flat in Bangalore the seller has not yet registered the flat.She bought it for 38lakhs during launch in 2010 and now I am buying it for 69 as now the flat is ready to occupy.

    The guidance value is around 45 lakhs in that area for that flat.Can I have a deed of transfer of rights agreement signed for the remaining 24L (69-45=24L).The flat has not been registered yet and there are no other miscellanous fittings in that apartment added yet.

    Kindly advise If I need to pay stamp duty on 69 Lakhs or can show only 45 Lakhs legally

    • http://www.nitinbhatia.in/ Nitin Bhatia

      As flat is not registered therefore you cannot execute deed of transfer of rights. Yours is a transfer case.

      In your case, you will be signing tri-party agreement between builder, you and seller where flat will be transferred by current owner in your name. For under-construction property, construction cost is not included in the registration therefore Stamp duty is paid only on amount mentioned in Agreement to Sale / Sell of current owner with the builder. There is no stamp duty on Agreement to Build.

  • Sreenath

    Hi Nitin

    Thanks for these blogs and it’s wonderful to read some of hidden things which are not explained anywhere else.

    Say i have a situation (as buyer) where Sale Agreement is recorded for 1 Cr (Market Value) & i am registering for guidance value (60 L). Hence i end up paying Stamp duty and registration charges only for 60L.

    My questions are

    1. Does Govt (Registration Office , RBI or Income Tax) has visibility into the Sale agreement and money disclosed in that (1 Crore) ? I presume RBI has because banks issued loan based on Sale Agreement.
    2. Above leads to another question , does Seller needs to pay Capital gains based on Sale Deed (60L) or Sale Agreement (1Cr) ? I saw your response in other thread that it’s based on Sale Deed money but isn’t 40L visible to govt showing that Seller has evaded Capital gains ?
    3. Seller agrees to registering at Guidance value (60L) but what are the reasons why seller wouldn’t let me disclose higher amount in Sale Agreement (1 cr) ? Essentially i need more loan and hence i need to disclose more amount in Sale Agreement but what are the reasons why they wouldn’t agree for something like that.

    • Sreenath

      Hi Nitin

      Appreciate if you can respond to these questions.

      Thanks

    • http://www.nitinbhatia.in/ Nitin Bhatia

      1. Income Tax Department & RBI has visibility to total transaction value that is why i suggested to execute DOTOR and notarize the same. As you are not hiding any fact from Govt and complete transaction is in white therefore there is no problem.
      2. 40 Lacs is not for cost of property but for furnishing of house (DOTOR) which is not included in cost of property. Sale Agreement is not transfer of title. Title is transferred through Sale Deed which is considered for capital gains.
      3. He would not like to show rest 40 lacs in white.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      1. Income Tax Department and RBI has visibility to total transaction value that is why i suggested to execute DOTOR and notarize the same. As you are not hiding any fact from Govt and complete transaction is in white therefore there is no problem.
      2. 40 Lacs is not for cost of property but for furnishing of house (DOTOR) which is not included in cost of property. Sale Agreement is not transfer of title. Title is transferred through Sale Deed which is considered for capital gains.
      3. He would not like to show rest 40 lacs in white.

  • Vineet

    Hello Nitin,

    Great blog. I have a few questions:
    1. How do I find the guidance value of a flat i am planning to buy in Pune
    2. The flat I am buying is in resale, but is raw, so no woodwork or anything. How do I do a DOTOR on that
    3. When I sell it in the future (say that I buy it for 1 cr, 80 laks is Sale Deed and 20 is DOTOR). How much will be my cost of the flat for Capital gains, will it be 1 cr or 80 lakhs.

    Thanks…

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Thanks for liking the blog..To answer your queries
      1. You will get the guidance value / circle rate from the sub-registrar office where the property is registered. It will be in psf. Add another 2 Lac for car parking to it.
      2. It is subjective, you can execute DOTOR
      3. One Cr

  • Shiv

    I bought a under construction flat on resale within 3 months of launch of the project and singed an Agreement to sell and got it endorsement from builder. Now my query is what is the stamp duty applicable on this property. is it on circle rate or agreement to sale

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Agreement to Sale or Circle Rate whichever is higher