How to Avoid Stamp Duty on Second Home?

Wondering how to avoid stamp duty on second home?

When it comes to avoiding stamp duty on a second home in India, there are several legally safe methods you can consider:

• Get Sale Deed Registered in the Name of a Woman: Many Indian states offer discounts to female homeowners. By registering the sale deed in the name of a woman, you can benefit from these concessions.

• Pay Stamp Duty Based on Circle Rate/Guidance Value: Instead of paying stamp duty based on the transaction value, consider paying it based on the circle rate or guidance value. This can help reduce the overall cost.

• Appeal for Market Rate Determination: If you believe the market rate is lower than the assessed value, you can appeal for a market rate determination. This may lead to a lower stamp duty.

• Register Under-Construction Property at Lower Undivided Share: For under-construction properties, registering a lower undivided share can reduce the stamp duty liability.

• Study State-Specific Rebates: Explore any state-specific rebates or exemptions available for second homes. Each state may have different provisions.

• Avail of Tax Benefits on Stamp Duty: While not directly avoiding stamp duty, you can claim tax benefits on stamp duty and registration charges under Section 80C of the Income Tax Act.

I hope this answers how can you avoid second home stamp duty.

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To avoid stamp duty on second home, you can consider the following strategies:

1. Gift the Money: Gift the money for a deposit to a family member and let them apply for a mortgage in their own name. By doing so, the property will be registered in their name, and you won’t be liable for stamp duty.

2. Act as a Guarantor: Act as a guarantor for a family member’s mortgage. In this case, the property will be in their name, and you’ll be providing financial support without directly owning the property.

3. Transfer Deed and Mortgage: Put the deed and mortgage of the second property in the name of a family member who will live in it. This way, you won’t be the legal owner, and stamp duty won’t apply to you.

4. Purchase a Lower-Value Property: If the second property is worth £40,000 or less, you may be exempt from stamp duty. Check the local regulations for specific thresholds.

5. Consider Alternative Property Types: Buy a caravan, mobile home, or houseboat as your second home. These may have different rules regarding stamp duty.

6. Inheritance or Divorce Settlement: If you receive land or property through inheritance, a will, or a divorce settlement, stamp duty exemptions may apply.

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Indian homebuyers are required to pay stamp duty when registering their property. Stamp duty greatly raises a homebuyer's financial burden by adding close to 3-8% of the transaction value (precise rates vary by state of residence). There are, however, legal and secure alternatives on how to avoid paying stamp duty on second home in India.

Yes, there is a way to avoid second home stamp duty. Put the mortgage and a deed in the name of the family member if the house was purchased for them. By doing this, stamp duty on the acquisition of a second home will be reduced. 

How to avoid stamp duty on second home?

Stamp duty on a second home can be reduced in the following ways;

• Get it registered in the name of a woman:

With a few notable exceptions, almost all Indian states provide discounts to female homeowners. For instance, women buyers in the national capital Delhi must pay only 4% stamp duty as opposed to 6% for male buyers. To take advantage of this benefit, you can think about registering the property in the name of a female resident of the home.

Even though the discount might be less in this situation, it is still feasible to take advantage of this discount if the property is being co-registered in the name of a woman. 

• Pay stamp duty based on the circle rate:

Circle rates are the set value below which you cannot register your property according to government regulations. This serves as the reference point for calculating stamp duty. You might want to think about registering your property based on its circle rate value because in some situations it can be less than the market value of the property.

• Appeal for market rate determination:

The property's market value can sometimes be less than its circle value. The law only requires you to pay stamp duty on circle rates, so you might be required to pay more for a property with a lower value. There is, however, a solution to this predicament.

In the event that the market value of a property is less than circle rates, buyers will be able to file an appeal with the sub-registrar pursuant to Section 47 of the Indian Stamps Act.

• Register under-construction property at lower undivided share:

A buyer of a house that is still under construction must pay stamp duty depending on the cost of the building as well as his undivided portion of the land on which the building will be constructed.

For instance, buyers of properties that are still under construction in Tamil Nadu and Karnataka must pay the stamp duty in two installments. According to the buyer's undivided share (UDS), the property is first registered in his name. 

Consequently, a smaller UDS would indicate reduced stamp duty. The property is registered a second time after project completion, calculating stamp duty based on the whole property value.

• Study the local stamp duty laws:

A buyer conducts extensive study before making a purchase. Because there are state-specific benefits that can be obtained at the time of property registration, it might be a good idea to study the local stamp duty law.

For instance, in Uttar Pradesh, the stamp tax on property transfers involving a family is now limited to Rs 7,000 (Rs 6,000 for the stamp duty plus Rs 1,000 for processing expenses). In Maharashtra, property transfers within a family only incur a Rs 200 stamp duty fee, despite the fact that the government is now reviewing this rule in an effort to raise revenue.

• Avail of tax benefits on stamp duty:

When your income tax debt is discharged, you can save money. The income tax act's Section 80C allows buyers to deduct up to Rs 1.50 lakh from the cost of stamp duty and registration fees when purchasing real estate. If there are joint owners, each may claim this deduction according to his or her proportionate interest in the property.

I hope these factors would help you with your query about how to avoid paying stamp duty on second home in India.

I hope this helps:)

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