Is stamp duty payable as per agreement value?

Stamp duty is payable on the market value of property. Market value of any property is determined by the stamp duty Authorities on the basis of the Stamp Duty Ready Reckoner issued by the government every year on April 1st. If the consideration amount is higher than the market value, the consideration amount will be treated as market value.

However, where property is sold or allotted by a government or semi-government body or a government undertaking or a local authority such as LIC, CIDCO, Income Tax Department on the basis of predetermined price, then that value is accepted as market value for the purpose of stamp duty.

Definition: Market value in relation to any property which is the subject matter of the document means the price which such property would have fetched if sold in the open market on the date of execution of such document or the consideration stated in the document, whichever is higher. However, for payment of stamp duty, market value is the value as worked out as per the Stamp Duty Ready Reckoner or the consideration stated in the document, whichever is higher.

Similarity: As per Sections 43CA, 50C & 56 in the Income Tax Act, the market value for the purpose of tax is same as the market value for stamp duty payment, which is worked out as per the Stamp Duty Ready Reckoner. Hence, it is advisable that the assessee should record the actual selling price worked out with the help of the Ready Reckoner and avoid under-valuation.

Thus, it has become very important for a professional to know all the intricacies of working of ‘stamp duty value’ as after recent amendments, now all sale of immovable properties will result into litigation with Income Tax authorities as it will result into higher tax (Sections 43CA, 50C & 56) for all parties involved.

Depreciation and appreciation

Depreciation is allowed on a structure which is more than 2 years old. It is allowed on the value of the property arrived at by reducing the value of land component. Depreciation varies from 5% to 70% of the above value. Other additions or deductions to the market value are as follows:

If the building has a lift, its value will increase by 5% to 20% depending upon the floor on which the property is situated.

If the building is only of ground + four floor or less without lift then the first, second, third and fourth floor qualifies for 5% to 20% deduction.

(The writer is a valuer of real estate and co-author of Stamp Duty Ready Reckoner)