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Stamp Duty: Maha Govt. All Set To Revise Rates

The Maharashtra government has proposed an increase in stamp duty to Rs 50 crore from the present Rs 25 crore on demerger and amalgamation of documents


Currently, stamp duty is charged as per market rates that can run into crores and often become the bone of contention of both the residents and developer on how to share this stamp duty. The Maharashtra government has proposed an increase in stamp duty to Rs 50 crore from the present Rs 25 crore on demerger and amalgamation of documents. The state cabinet meeting is expected to give approval to the proposal in this regard moved by the state revenue department.

The stamp duty for redevelopment of MHADA colony at Kala Chowki Abhyudhay Nagar was around Rs 50 crore and due to dispute between developer and tenants on how to share it registration of the agreement was delayed by more than a year. There are 104 MHADA colonies across the city that has around 2.25 lakh tenements. Most of them were constructed between late 1960s to 1990s and many of them need urgent redevelopment as they are mergers, amalgamations and acquisitions.  Leave and licence agreements and housing loan mortgages will soon be less expensive in Maharashtra. This is because the state government has slashed the stamp duty applicable to these categories. The government has also extended the leave and licence agreement period to 33 months from the earlier 11 months. The state government, in a recent meeting, has decided to rationalise the stamp duty structure.

The government has also decided to put a cap of Rs. 25 crore on stamp duty being charged on mergers, demergers and other corporate transactions. Currently there is no ceiling on the stamp duty being charged. At present, these transactions are charged a stamp duty at seven per cent of the value of the company’s assets or 0.7 per cent of the market value of the shares whichever is higher. However, the most significant change will be in the structure of leave and licence agreements. The present system allows leave and licence agreements to be signed for only 11 months. Last year, the government made registration of all property agreements mandatory including leave and licence agreements. Leave and licence agreements will also attract a lower stamp duty. The amendment to the Maharashtra Rent Control Act says that if the earnings from the property for which a leave and licence agreement has been signed is less than Rs. 2.5 lakh per year including the deposit, it will attract a stamp duty of just Rs. 500. If net proceeds from the property are between Rs. 2.5 lakh and Rs. 5 lakh, the stamp duty will be Rs. 1,000 and for receipts exceeding over Rs. 5 lakh, the duty will be Rs. 2,000. Under the leave and licence agreement, the deposit is an amount which has to be returned after a specified period of time.

Often, huge amounts are taken as deposits. Under the current dispensation, stamp duty calculations are done according to article 36 of the Bombay Stamp Act pertaining to lease documents. In these circumstances, the authorities recover the stamp duty at the rate of 3 per cent of the income from the leave and licence transaction for properties valued at above Rs. 10,00,000 for residential premises. The stamp duty is the rate of 10 per cent for commercial premises, on the deposit as well as the lease amount. The new system is expected to bring cheer to the housing sector as the stamp duty on housing loan mortgages too has been brought down to one per cent from the current rate of two per cent. The government has also proposed a cap of Rs. 200,000 on the stamp duty. This means that irrespective of the cost of the property, the stamp duty will not exceed Rs. 200,000. The stamp duty is the second largest revenue earner for the state government with over Rs. 1,800 crore collected annually, of which Rs. 900 crore comes from Mumbai alone.

It is also a part of the revenue department’s exercise to explore options to mobilise additional revenue for the state kitty. The department has set an annual target of Rs 27,000 crore through stamp duty and registration fee for the year 2019-20. Till December, the department collected Rs 21,741.2 crore. They include revision in the stamp duty on mining lease, bringing in new rules for recovery of stamp duty on transferable development right, change in stamp duty on imported cargo delivery order at Mumbai international airport and simplification of stamp duty rate charged on bank documents.

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