Agreement for sale / Sale Deed / Stamp Duty

[ngupta]

Hi All

While to talking to one developer, he stated that say agreed value is Rs 40L to be paid by DD,
whereas government guidance value is say mere Rs 10L.

For such case, in order to pay minimum enough registration stamp duty,
follow this process:

1. Make Agreement for Sale for Rs 40L. (get it franked for Rs 200)
2. Make Two DD, one for Rs 30L and other for Rs 10L
3. Then make sale deed for Rs 10L with details of second DD only.
4. Calculate stamp duty as per Rs 10L which is applicable guidance value and make DD in favor of registrar.
5. Get Sale Deed Registered.

Is above process correct legally.

[blrsiteseeker]

You may save a few bucks in registration fees. But you are becoming a party to corruption.

We all complain about corruption at the upper levels. But when it comes down to ourselves, we look for ways to beat the system. Why is that right.

I understand you are trying to find out the legal way, so I commend you for trying to go about the right way.

If you and each one of us - don't encourage such loop holes in the system, it would be better for us, for our cities and for the country. And all the efforts for anti-corruption being showcased will become successful.

Good luck with your property purchase!

[ngupta]

Mr blrsiteseeker,

I think you have got it wrong and don't be emotional.

Note no one is trying to save bucks or beat system with loopholes.

It is told to me that it is THE way to do things by legal guy, for which I am seeking opinion for cross check.

Further, say you have MARBLE house and your neighbor has very simple house.
Yet both pay same tax as per covered area, but not value of house.

Similarly Govt (in fact true is many states in India) wants that Minimum Stamp Duty
to be paid as per its set guidance value and no one undervalue it to evade tax.

WRT to transaction for higher value than guidance value,
few govt don't mind more money coming to there coffer
which they can misuse, the way they are doing over years and years.

Whereas few govts, clearly states (I think maha and Haryana) just pay minimum due to govt,
transaction can be of whatever amount.

Note full transaction is CHEQUE and no one is doing anything unlawful.

[Ravi h.g.]

Hi ngupta,

if you have cash at your disposal (savings...Rs 30lakh etc ) its ok . but if u rgetting funding from any bank, most banks as i know wont accept this way, u have to pay stamp duty at existing rates to the amount u get funded by bank,

for example:
(assuming one is going for loan and guidance value at Rs 2000/- for 1000 sft superbuiltup area)

total basic apartment cost (am assuming an apartment within bbmp limits ) : Rs 40,00,000/-
registration cost--stamp duty @ 7.8% or x% : 40,00,000 *7.8% = 3,12,000/-

total project cost : Rs 43,12,000/-

bank funding 80% : Rs 43,12,000 * 0.8 = Rs 34,49,600/-

20% from buyer (thru savings, personal loan etc): Rs 8,62,400/-

now

Rs 2000 * 1000sft * 7.8% is min stamp duty one needs to pay -----Rs 1,56,000/-

this one can do if you r having enough savings .

ask your tax man which is better

this problems can be mostly resolved if govts all over states bring stamp duty at 5% ( thats one goal as per jnnurm) and increase the guidance value atleast 75% of market value, than more people have to disclose and more money to govt and more services to public, reduces speculation and brings uniformity.

recently bbmp was forced to implement online plan sanction approach (its already in places like chennai, coimabatore, hubli), if they dont, they wont get funds from jnnurm and those funds from central govt will be diveted to other cities.
-------------
"Further, say you have MARBLE house and your neighbor has very simple house.
Yet both pay same tax as per covered area, but not value of house."

both have to pay different property tax with in bbmp limits. u can check with any bbmp assesors in every area.

comments welcome.

regards,
Ravindra kumar hg

[ngupta]

Thanks Ravi for your reply.


Let me not put name of builder.

But this builder is building project with more than 1000 flats in it.
and doing multiple projects.

They donot charge registration on basic rate, say Rs 3500.

But only only govt guidance value, which in say Rs 1000.

They take full payment by cheque as most of others.

Most of clients as usual take loan, as per above said norms.

I too was of opinion, that builder should charge 7.8% (6.8+1) on basic rate plus car parking.

But still they dont, yet their customers get 80% or so loans from all banks.

[blrsiteseeker]

Mr blrsiteseeker,

I think you have got it wrong and don't be emotional.

Note no one is trying to save bucks or beat system with loopholes.

It is told to me that it is THE way to do things by legal guy, for which I am seeking opinion for cross check.

Further, say you have MARBLE house and your neighbor has very simple house.
Yet both pay same tax as per covered area, but not value of house.

Similarly Govt (in fact true is many states in India) wants that Minimum Stamp Duty
to be paid as per its set guidance value and no one undervalue it to evade tax.

WRT to transaction for higher value than guidance value,
few govt don't mind more money coming to there coffer
which they can misuse, the way they are doing over years and years.

Whereas few govts, clearly states (I think maha and Haryana) just pay minimum due to govt,
transaction can be of whatever amount.

Note full transaction is CHEQUE and no one is doing anything unlawful.

Ok, let me put it straight again
1. your note on - that it is the legal way to do that ! Please check, why would the government want to do it that way, what is the benefit to them. ANd if it is legal, why the discrepencies on the numbers.
2. Govt. wants minimum stamp duty - what exactly does that mean. The numbers for stamp duty are set based on the value of the property being registered (as a percentage of it). So yes, they are expecting a number, which they mandate we pay when registering the site.
3. Wrt. to transactions higher than guidance value - govt has been doing it for years. Do you understand the meaning of guidance value. The value is set, so that this black and white transactions (which they know is happening), will not completely eliminate the need to pay stamp duty. What they are saying is - that a site in that area cannot sell for less the set guidance value and so they expect stamp duty at a minumum on the guidance value. If the property sold for more, then it is the seller/buyer's obligation to pay the stamp duty on the sale value.

Don't think I am getting emotional. I did accept the fact that you were checking if it was legal. What I am saying is we should discourage this part cash/part DD transactions. WHich is aiding folks dispose off black money and also avoid stamp duties etc.

[ngupta]

Mr Blrsiteseeker,

Unsure, but you hardly read msg carefully and just jump to reply, as excited as child.

I asked, "is it legal way to do it" and you started preaching like Saint.

I am saying full amount is DD, you are bringing in cash from somewhere.

I think lets stop here and if we are not subject matter expert, just share opinion then guiding and advising.

thanks for all your education.

regards
ngupta

[blrsiteseeker]

don't want to argue any more. seems like you have not read my message clearly either. Never mind - let's cut it here.

[bboy]

Dear friend,

It surely appears that you were trying to 'minimize' (a politically correct substitute for the word 'evade') the stamp duty as much as possible. No, the government is not trying to get the minimum amount of stamp duty. I guess it is clearly stated in the law and any lawyer worth his salt would know it that the stamp duty is to be paid on the higher of either guidance value or the actual transaction amount. That is, if your transaction value is less than the guidance value, then you pay stamp duty on the guidance value and if the transaction value is more than the guidance value, then you pay stamp duty on the transaction value. If those two are equal, then it is your choice on which one you want to pay the stamp duty on .

The mere fact that you are paying by cheque or DD doesn't automatically make your full transaction white even though there are checks and balances to ensure bank transactions are using white money. Also, the question of white money is related to income tax department, while that of stamp duty is related to the revenue department. They may be inter-linked in some way though, especially for traceability purposes.

Also, I am not sure if any bank would actually fund a transaction for more than the legally declared value. Also, how would you legally document that you have paid the seller the amount shown in the sale agreement?

Your attempt to look Innocent was too transparent, especially when you 'assumed' the legal way is the one when you pay the government less!

Regards,

bboy

don't want to argue any more. seems like you have not read my message clearly either. Never mind - let's cut it here.

[MNRS]

In case of the plots, you can register to the land value and show the other amount as development value. Say if you are buying a property Rs 1500 psft and where as the guidance value is about Rs. 500 psft, then what you can do as show Rs. 500 as the land value and Rs.1000/ psft as development value. And the registration will be done for the guidance value so the registration amount will be less. This is true in case of gated communities etc, because most of the amount there we are paying for the sake of development. Here banks will fund on total cost (i.e. Land + Development cost aka the rate you are paying)

I am not sure if this can be applicable on the flats too. You may check with your builder or lawyer.