Stamp Duty Refund on Cancellation of Sale Deed
Most of us are aware that any purchase of transferable property in India entails the payment of stamp duty to the respective state at the extant rate prevailing.
However, quite often it happens that after the stamp duty is paid, you may decide to walk out of the deal due to some of the conditions of the sale not being met.
The question then is; what happens to the stamp duty already paid, in the event of cancellation of sale deed?
Can the person seek stamp duty refund in such cases? And what are the procedures for the same?
The reality is that there is a provision for you to claim stamp duty refund in the event of such cancellation of sale deed and the sale being called off. As a participant in the real estate market, you must be fully familiar that the stamp duty refund is eligible for refund through a simple process. However, here is what you must know before that.
Recap – When is the Incidence of Stamp Duty Payment?
One of the first things to understand is when is stamp duty paid, especially with reference to the real estate transactions. The stamp duty is levied on transfer of property in India. The stamp duty is paid at the land registrar office at the time of registering the sale deed, which is the first step to making the new buyer the rightful owner of the property.
Without payment of stamp duty, any transfer of property is illegal and does not have any legal validity, nor can such cases be taken to a legal court for redressal.
The stamp duty or the registration charge is levied by the respective registrar office to record the transfer and maintain it in their records. That actually forms the basis of any legal sale of property in India.
Let us now turn to what happens if the sale deed is cancelled after the stamp duty has already been paid. Can a refund be claimed in such cases?
What Happens to Stamp Duty if Sale Deed is Cancelled?
Now comes the million-dollar question. In the event of cancellation of sale deed, what about the stamp duty paid, since it is a rather substantial sum of money. Can the stamp duty refund be claimed by the party who has already paid the stamp duty. In case the sale deed is cancelled within 6 months, then the stamp duty refund can be claimed, subject to a small deduction of 10% towards administrative charges.
Typically, the rates of stamp duty is calculated as a percentage of the property official value and it varies from state to state. Also, the rates are different for different categories tend to vary.
For instance, commercial property pays the highest rate of stamp duty followed by residential property and then agricultural land.
The issue of refund of stamp duty only arises if the transfer of the property has been registered with the Land Records Office and stamp duty has been paid with appropriate receipt acknowledging the same.
When Can Stamp Duty Refund Be Claimed?
The cancellation of the sale deed and the refund of stamp duty is only permissible under conditions wherein the circumstances have forced frustration of the contract.
- If the buyer of the property went bankrupt or if the person died before the sale, then the sale deed can be cancelled and the refund of stamp duty can be claimed.
- Also, if the person signs a sale deed to buy a house in a city and has to give it up due to his transfer to another city, then again such a sale deed can be cancelled and the stamp duty refund can be claimed by the payer.
- The buyer of property can cancel the sale deed if titles are not clear or of the seller is not discharged from bankruptcy, or the seller has not been able to register and transfer the property to the buyer.
- If either party does not honour their side of the contract, the other party can legitimately ask for cancellation of sale deed and seek stamp duty refund.
Key Points to Remember in Stamp Duty Refund
Before cancelling the sales deed and seeking refund of stamp duty, it is best to seek legal counsel. Also try to send a legal notice and file a lawsuit if necessary to get a court order for cancellation. That makes your job a lot easier to claim the refund. Once you are legally in the clear, there is a simple process to follow.
Attach the original sale deed and the cancellation order (court order) along with the application for refund and submit to the Land Record Office. Refund is only eligible if the deal is cancelled within a month of the registration of sale deed. The application also needs to justify the cancellation with reason. The refund process takes between 15 to 30 days.