Here's why stamp duty is payable on the exchange of flats

Here's why stamp duty is payable on the exchange of flats

It is advisable to take precautions to avoid complications in the future

Sunitkumar GuptaUpdated: Saturday, January 21, 2023, 12:04 PM IST
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Stamp duty is payable as per Conveyance Deed on the market value of the property of the greatest value. Generally, one copy of the ‘Exchange Agreement’ is made and registered. If that happens, then various practical difficulties could arise at a later date. For instance, who will keep the original? What happens in case if one of them wants to take the loan against his flat, what if both of them want to take a loan from different banks for their respective flats, what if the person having the original sells and goes away and new owner does not co-operate with original owner? Precautions to be taken are as follows:

a) Assuming there is one “Flat-A” owned by “Person AA” and he wants to exchange it with “Flat-B” owned by “Person BB”, in the Exchange Agreement there should be a clause which states that the original agreement will be considered original agreement for “Flat-A” and will remain with its new owner, “Person BB” and the second copy will be considered original agreement for “Flat-B” and will remain with its new owner “Person AA”.

b) Agreements should be made in duplicate. Original agreement will be charged with full stamp duty and second copy of agreement will be charged only with Rs.100.

c) Both of the agreements must be registered. Original agreement will be charged with full registration fees and second copy will be charged very nominal amount of registration fees i.e. Rs.1000.

d) Both the persons must keep their respective copies and will be free from each other in all respects without any botheration.

Rates mentioned in the stamp duty ready reckoner for Land is per sq.mtr. considering F.S.I to be 1 and rates mentioned for buildings whether Residential, Office, Shop (Commercial) or Industrial are for per sq.mtr. Built-up area (Rate is inclusive of the value of land). Stamp duty should be paid on built-up area only and not on carpet area or super built up area.

Stamp Duty charged on the basis of built-up area of the premises. Built-up area is taken to be 20% more than the carpet area. However, in case the document contains reference of RERA carpet then 10% is added to RERA carpet area to arrive at the built-up area. Hence all the documents must record either carpet area, RERA carpet or built-up area in square metres only. There is no recognition to super built-up area or saleable area hence the same should be avoided in the agreement to avoid excess payment of stamp duty.

Previously, when it was difficult to determine built-up area and if carpet area was mentioned in the agreement, then the same was increased by 20 percent to arrive at built-up area. Also, if super built-up area was mentioned in the agreement, then 20 percent was reduced from super built-up area i.e. 80 percent of super built-up area was built-up area. But the Stamp Duty and Registration department has now withdrawn above method partially and adopted uniform method as mentioned above.

This mode of calculation was primarily a shortcut to an acceptable solution when built-up area was not mentioned in the document. It should never be adopted to calculate carpet area from the super built-up area or vice versa, because arithmetically it will never give correct figure.

Doing the math

The relation between square feet and square metre for calculation purposes is as follows:

1 square metre = 10.764 square feet

1 square foot = 0.0929 square metres

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

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