What Is Stamp Duty & Why To Pay It?

Last Updated: 12 Aug 2025

Buying a house is one of the biggest financial decisions that you will make in your life. It is an overwhelming experience, both financially and emotionally. While buying a house, we need to identify the property, make a down payment, apply for a loan, sign the sale agreement, etc. One of the important steps & the final step while buying a house is the possession and registration of your property. After the property is transferred to you, it is your responsibility to get it registered in your name.

Possession is the physical transfer of the property, but it is not sufficient. You also need to have legal evidence of ownership. For this, you will have to get the property registered in your name in the local municipal records, with the seller documenting that the property is being transferred to you. At the time of registration, you will also have to pay a stamp duty, which is a government tax levied on property transactions. In this article, let’s try to understand what are stamp duty fees, why it is essential to pay stamp duty and many more aspects of stamp duty.

Stamp duty is collected on the basis of the property value at the time of registration. Stamp duties vary from state to state and also for different property types, old or new. Since it adds up to the property cost, it’s better to have a fair idea before you finalise your property deal.

Stamp duty is a legal tax payable in full and acts as evidence for any sale or purchase of a property. The levy of stamp duty is a state subject, and thus, the rates of stamp duty vary from state to state. The Centre levies stamp duty on specified instruments and also fixes the rates for these instruments.
It is usually paid by the buyer regardless of the agreement, and in case of property exchange, both the seller and the buyer have to share the stamp duty equally.

What is Stamp Duty?

It is a tax, similar to income tax, collected by the government. Stamp duty is payable under Section 3 of the Indian Stamp Act, 1899. Stamp Duty must be paid in full and on time. If there is a delay in the payment of stamp duty, it attracts a penalty. A stamp duty paid instrument/document is considered a proper and legal instrument/document, has evidentiary value and is admitted as evidence in courts. A document not properly stamped is not admitted as evidence by the court.

Why Is Stamp Duty Important?

If you are curious about what is stamp duty, it is a transaction-linked levy that validates legal documents, especially those transferring real estate. By affixing a duty, the state guarantees the document’s admissibility in court, secures public revenue, and establishes an indisputable record of ownership, reducing title disputes and fraud.

Tax on property transactions also funds civic infrastructure, such as roads and drainage. Moreover, non-payment attracts hefty penalties and can stall registration, delaying access to home-loan disbursements and resale prospects. Thus, the charge protects buyers, boosts state coffers, and underpins the integrity of India’s land-record system under the Indian Stamp Act, 1899.

What is an Instrument in Stamp Duty?

Under the Indian Stamp Act, 1899, an instrument is any written document through which a right or liability is created, transferred, limited, extended, extinguished, or formally recorded. This broad definition covers both everyday and high-value transactions because the Act aims to capture every legal act that can affect property or financial interests.

Typical instruments include sale deeds, lease agreements, gift deeds, mortgage deeds, share transfer forms, powers of attorney, affidavits, partnership deeds, bonds, insurance policies, and even simple receipts. Each item listed in Schedule I of the Act is an instrument and attracts stamp duty at the rate specified for its category.

Stamp duty is important because it is charged on the act of making a document, not on the asset itself. If a document is not properly stamped, it cannot be used as evidence in court unless the missing duty and penalty are later paid. Proper stamping gives the document legal value, makes it valid, and helps prevent future arguments between parties. Also, stamp duty is a key source of income for state governments, and having a uniform law across India makes things consistent. Whether a document is printed, franked, or e-stamped, it is only considered a legal and enforceable record once it has been properly stamped.

When is the Stamp Duty Payable?

Now that you know what is stamp duty, you must note that it is payable before execution of the document, or on the day of execution of the document, or on the next working day after execution of such a document. Execution of the document means putting a signature on the instrument by the party to the document.

Who is Liable to Pay?

As per the Indian Stamp Act, 1899, in the absence of any agreement to the contrary, the purchaser/transferee has to pay stamp duty, or in case of exchange of properties, both parties have to bear stamp duty equally.

Types of Stamp Duty in India

There is no universal answer to what are stamp duty charges. They differ by the instrument they legalise. The most common is stamp duty on immovable property, applied to sale deeds, gift deeds, and lease deeds of land or buildings. Securities duty covers stock, bond, and debenture transfers under Section 9A/9B of the Act. Court fees, like duties, apply to affidavits and powers of attorney.

Share certificates attract a nominal stamp duty. Lastly, special duties exist for merger schemes and warehouse receipts as listed in recent amendments to the Act. Each category carries its own schedule rate, making compliance essential for the property ownership transfer tax.

How Is Stamp Duty Paid in India?

Stamp duty fees can be cleared through three modes:

• Physical stamp papers: Buyers purchase pre-printed non-judicial papers from authorised vendors, draft the instrument on them, and execute before registration. Denominations are limited, so multiple sheets may be stitched together.
• Franking: One visits a designated bank or franking agency; the duty amount is machine-printed (franked) on the document after cash or digital payment. A franking imprint acts as duty proof.
• E-stamping: This is the fastest route. Pay online via the SHCIL/StockHolding portal, choose property details, generate an Application Reference Number, and download a tamper-proof e-stamp certificate bearing a Unique Identification Number. Submitting this print-out at the sub-registrar finalises payment. Each process culminates in registration within four months of execution to avoid penalties.

What is the Penalty for Not Paying Stamp Duty?

Once you understand what is stamp duty in India, you need to be prompt in paying it. Any delay in duty payment will incur a 2% per month penalty to a maximum of 200% of the deficit amount of stamp duty. Stamp papers are to be purchased in the name of either of the parties, i.e, seller or buyer involved in the agreement, failing which will disable the stamp paper. It is said to be valid for six months from the date of purchase, only if the duty is paid on time.

How Should One Sign an Instrument Affixed with an Adhesive Stamp?

According to the provisions of Section 12, any person executing an instrument affixed with adhesive stamps shall cancel the adhesive stamp by writing on or across the stamp his name or initials. If such an adhesive stamp has not been cancelled in the aforesaid manner, such a stamp is deemed to be unstamped.

How Should Instruments with Impressed Stamps Be Written?

As per the provision of Section 13 of the Indian Stamp Act, 1899, any instrument on an impressed stamp, shall be written in such manner that the stamp may appear on the face of the instrument and cannot be used for or applied to any other instrument i.e., cancel the adhesive stamp so affixed by writing on or across the stamp his name or initials. If such an adhesive stamp has not been canceled in an aforesaid manner, such a stamp is deemed to be unstamped.

State-Wise Stamp Duty Rates

The answer to the query, what percentage is stamp duty, is not fixed; every state notifies its own slab, sometimes with gender concessions. Typical ranges sit between 3% and 8% of the ready reckoner or market value.

State	Male Buyer Rate	Female Buyer Rate	Notes
Maharashtra	6%	5%	1% metro cess extra in Mumbai
Delhi	6%	4%	An additional 1% registration fee
Karnataka	5%	5%	2% for <₹20 lakh
Tamil Nadu	7%	7%	Uniform across genders
Gujarat	4.9%	4.9%	Surcharge 40% of the duty
Uttar Pradesh	7%	6%	₹10,000 max rebate for women
West Bengal	7%	7%	8% above ₹40 lakh
Kerala	8%	8%	Highest among large states
Telangana	5%	5%	Extra 1.5% transfer duty

Rates frequently change – verify with the local registrar before executing documents.

Is Stamp Duty Payable on All Instruments/Documents Relating to the Transfer of Immovable Property?

Except for transfer by Will (or by original nomination in a co-operative housing society) all transfer instruments/documents including agreements to sell, conveyance deed, gift deed, mortgage deed, exchange deed, deed of partition, power of attorneys, leave and license agreement, agreement of tenancy and lease deeds have to be properly stamped before registration.

It is clarified that when a nominee transfers the flat subsequently in the name of the legal heirs, that transfer instrument is to be stamped as per the market value. If you have purchased a flat in a co-operative housing society on or after 10-12-1985, you have to pay the stamp duty on the market value as per the Ready Reckoner. A flat purchased through an agreement for sale on or before 9-12-1985 required stamp paper of Rs. 5 only.

However, a flat purchased on or before 9-12-1985 will require stamp duty on the market value at the time of conveyance of the property in favour of the society. The concept of payment of stamp duty on market value was introduced from 04-07-1980, and will be charged on agreement value only.

Conclusion

So, the answer to what is stamp duty in India is that it serves as a pivotal property ownership transfer tax. It legitimises deeds and bolsters state revenue under the Indian Stamp Act, 1899. While core principles are uniform, rates and payment channels vary by state. Timely compliance, via physical stamps, franking, or e-stamping, ensures hassle-free registration and a secure title.

Frequently Asked Questions

1. Does stamp duty include registration charges?

Stamp duty fees are separate from the 1% registration fee levied under the Registration Act; both must be paid at the sub-registrar’s office.

2. Can I claim a tax deduction on stamp duty?

Section 80C allows a deduction of up to ₹1.5 lakh for the stamp duty paid on a self-occupied house in the year of purchase.

3. Who bears stamp duty in a property sale?

Customarily, the buyer pays, but parties may contract otherwise; authorities only recognise payment, not who paid.

4. Is stamp duty refundable on cancelled deals?

Yes, most states refund duty (after deduction of 10%–20% administrative fee) if the original instrument is surrendered within the statutory period.