A Comprehensive Guide to Understanding Stamp Duty Percentage and Its Impact on Real Estate Investments

Paying stamp duty is necessary under Section 3 of the Indian Stamp Act of 1989. It is a tax that is paid to the Government of India on transactions of immovable properties. Maharashtra has some of the highest stamp duty rates in all of India. This increases the complexity of real estate investments in pricey cities like Mumbai. Considering registration fees, different notices and modifications, and other factors is part of buying and selling! Even while it could be emotionally and financially taxing, the effort is unquestionably worthwhile.

This blog will cover stamp duty percentage in Mumbai, the factors that govern it, and essential, useful information on buying a property in Mumbai. 

Stamp Duty and the factors that govern it 

Stamp duty is not uniform across India and varies based on the state where the property is located. Within states, stamp duty has to do with whether the property is located in a rural area or an urban area and the transaction cost. States such as Haryana charge higher stamp duty for properties in urban areas than the ones in rural areas. Apart from location, factors such as age, gender of the owner, type and use case of the property are also taken into consideration. 

Location

Areas that fall under the jurisdiction of a municipality have a higher stamp duty percentage than those under a Panchayat.

Type of Property

Depending on whether the property is identified as residential, commercial, or a mix of both or industrial, the stamp duty varies.

Age of the Property

Properties that are old or have a high building age attract fewer buyers than new properties. Taking this into consideration, stamp duty for such properties varies.

Gender of the Owner

In 2021, the Maharashtra State Government said that women buyers can now avail of a 1% concession on stamp duty as compared to the usual 6%. However, this concession is applicable only to residential properties and not to commercial and industrial properties. Recently, the Government also removed the 15-year cap, which prohibited women buyers from availing the 1% rebate to sell residential properties to males for the next 15 years.

Maharashtra Stamp Act, 1958

It is imperative to understand the Maharashtra Stamp Act because stamp duty in Mumbai is levied under this Act. The stamp duty percentage in Mumbai is dependent on the value of the property. This is mentioned in the buyer-seller agreement and the Ready Reckoner Rate. The Maharashtra Stamp Act, 1958 defines the Ready Reckoner Rate. It is the rate of the immovable property for the payment of stamp duty and registration fees. These rates are revised annually by the Maharashtra government and are updated on their website. Ready Reckoner Rate is sometimes also known as circle rate or guidance value. 

As a major relief to homebuyers, the Revenue Department’s Mumbai Office, in a major notification, announced that Ready Reckoner Rates for the FY 2023-24 will remain unchanged. 

For example, the Ready Reckoner Rate in Andheri East for Residential Properties is between ₹1.14 lakhs to ₹2.24 lakhs per square metre, while in Andheri East itself, the Ready Reckoner rate for an industrial property is ₹1.25 lakhs to ₹2.68 lakhs.

Stamp Duty on Properties in Mumbai

In 2020, the state government of Maharashtra introduced reduced stamp duty solely for commercial properties. This decision was taken owing to the slow pace of Real Estate at that point in time. For a period of 3 months, which is September 1 to December 31, 2020, stamp duty was reduced to 2% from the previous 5%. This cut was brought back to its original 5% in March of 2021 and has been in continuation ever since. Hence, for a current commercial purchase in Mumbai, the stamp duty percentage in Mumbai is 5%, which includes 4% stamp duty and 1% Metro Cess of the market rate of the property. (Metro Cess is a transport surcharge and is meant to be used for funding transport infrastructure projects such as bridges, metro, and flyovers in Mumbai). This Metro Cess was announced by the State Government and became applicable on April 1, 2022. Male buyers have to pay 6% stamp duty, which involves 5% stamp duty and 1 % Metro Cess. Registration charges for properties below ₹30 lakh are 1% of the property value, while for properties above ₹30 lakh, the charges are ₹30,000. In Navi Mumbai, the stamp duty payable for male buyers is 7%, the breakdown of which is 5% stamp duty, 1% LBT (Local Body Tax), and 1% Metro Cess. Registration charges in Navi Mumbai are the same as in Mumbai.

Stamp Duty Concession for Investors in Mumbai 

To boost real estate deals and promote new constructions, the MVA government in 2022 extended the time for a waiver in stamp duty for investors who would sell their properties in less than one year of purchasing them to earn the benefit of the waiver. Now, the investors can earn a stamp duty waiver on a resale made within 3 years of the property purchase.  

In the End 

For any property to be legally possessed, stamp duty is required. It is recommended to examine registration fees, the Ready Reckoner Rates for the location where the purchase was made, and any benefits based on gender that female buyers may be eligible for. Being observant and aware of such nitty-gritty might help one make prudent financial decisions and also benefit from existing rules and notifications to their utmost.