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Loans provide financial support for various purposes such as buying a home, expanding a business, pursuing higher education, or covering medical expenses. While planning for a home loan, most homebuyers consider the cost of the property only. However, buying a home involves paying many other additional costs as well. One such cost is the stamp duty. Read on to learn more about this tax that homebuyers are liable to pay.
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What is Stamp Duty?
Stamp duty is an indirect tax that a homebuyer must pay the state government to formalize or legalize the transfer of property from its current owner to its new owner. Stamp duty is applicable on all kinds of properties, including residential, commercial and resale properties.
The state government decides the stamp duty that a homebuyer is liable to pay. For instance, the Karnataka government levies a 5% stamp duty if the property is valued above Rs.45 Lakh, 3% if the property is valued between Rs.20 and Rs.45 Lakh and 2% if the property is valued below Rs.20 Lakh. The Kerala government charges stamp duty at a flat rate of 8% of the value of the property.
Some state governments promote female homeownership by offering rebates on the stamp duty. For properties in Himachal Pradesh, the government levies a 4% stamp duty to female candidates and 6% to male candidates whereas in the case of a joint loan, it levies a 5% stamp duty. In Haryana, male homebuyers pay a 7% stamp duty whereas female homebuyers pay a 5% stamp duty. Similarly, in Maharashtra, male homebuyers pay 6% stamp duty charges and female homeowners pay 5% charges.
Homebuyers must pay the stamp duty charges either on the day the transaction is made or the day after it. Any further delay in paying the stamp duty can attract a penalty charge of 2% per month.
How is the Stamp Duty Calculated?
As discussed earlier, the state government decides the stamp duty that a homebuyer has to pay at the time of property purchase. In most states, the stamp duty varies between 5% and 7% of the value of the property. The stamp duty is calculated either on the circle rate or the market value of the property. Since many factors determine the circle rate, the actual stamp duty may vary accordingly.
For instance, circle rates vary for residential and commercial properties. Commercial properties tend to be more expensive than residential properties and therefore, also attract a higher stamp duty charge. Similarly, properties located in urban areas and new properties located in central locations have a higher market and circle rate value than properties located in rural areas or the outskirts. Therefore, the former attracts a higher stamp duty than the latter.
Homebuyers planning to buy a home can use a stamp duty calculator to calculate the stamp duty they are required to pay. Read on to learn more about the stamp duty calculator.
What is a Stamp Duty Calculator?
The stamp duty calculator is an online tool that most lenders host on their websites. This calculator is easy to use and helps homebuyers estimate the stamp duty they are liable to pay to the state government to legalise their property purchase. The calculator asks for only two things: the value of the property and the state in which the property is located. Based on this information, the stamp duty calculator displays the stamp duty they are required to pay on their home loan purchase. The stamp duty calculator helps home loan buyers to plan their purchase.
Additional Fees that Home Loan Borrowers Must Consider When Deciding Home Loan Amount
Other than the stamp duty charges, here are some additional charges that you should know about while availing of a home loan:
1. Registration Charges
The registration charge is a fee that a homebuyer pays the state government to get the property documents registered with the state. In simple words, the registration charge is the fee that one pays to make sure that the state government recognises them as the true owner of the property. Registration charges vary from state to state and can go up to 5.5% of the property value. However, in most cases, the registration charges vary around 1% of the property value. Borrowers can use a property registration charges calculator to calculate the exact amount they will need to pay on their property purchase.
2. GST
If you are planning to move into a ready-to-move-in property, you won’t be required to pay any GST. However, if you are investing in an under-construction property, you will be required to pay GST. This GST charge is usually 12% of the value of the property.
3. Maintenance and Security Deposit
When people move into their homes, builders usually ask homebuyers to deposit maintenance and security charges for the next year in advance. Since it can be a sizable amount, it is best to ask your property builder in advance and include this cost in your home loan amount if required.
4. Parking Space Charges
In many cities, builders charge extra for a parking space. Homebuyers who own a car should also consider the parking space charges while deciding their home loan amount.
5. Interior Costs
After moving into a new home you may be required to stylize the house as per your needs. Hiring an interior designer for basic interior designing can cost anywhere between Rs.5 to Rs.10 Lakh. Additionally, if you are planning to buy appliances, you will need to plan your expenses accordingly.
Final Words
Buying a home becomes much easier when one has done their research in terms of expenses. Many additional costs are associated with buying a home such as stamp duty or registration charges. Homebuyers should plan for these expenses in advance to avoid any mismanagement in the budget. Homebuyers can include these costs in their home loan amount to be able to navigate the home loan buying process easily and conveniently.
