Stamp Duty on Rental Agreement and Its Registration!

To give rent agreements legal validity, you must register the rental agreement stamp paper by completing the proper procedures and paying the required fees. You must also pay rent agreement stamp duty to register it. Although both rent and lease are two different terminologies, the stamp duty fee required for both is the same.

In this article, let’s get to know why registering a rent agreement is important, the determining factors of rental agreement stamp duty value, accepted payment modes, and more.

Why Register Your Rent Agreement?

A legally binding rental agreement is essential for a harmonious landlord-tenant relationship. It not only strengthens the bond between both parties but also safeguards their rights. It also notifies others about the property’s ownership. Contrary to this, an oral agreement between the landlord and the tenant is not legally binding and is considered null and void. So, in the case of any rental property, a written agreement is inevitable.

Another important advantage of registering a rent agreement is that it serves as legal proof and can safeguard the landlord in future legal issues. When a large asset like a residential property is involved, the landlord requires a document that can offer legal protection in a future disagreement or resistance from the other party. 

The owner needs to register the agreement if the rent term has exceeded 12 months. In fact, in such cases, it is mandatory for both the tenant and the owner to visit their nearest sub-registrar office in the rented property’s state or district. Both the parties are required to reach the office with two witnesses each to register themselves. But if any of the parties isn’t available, they might as well sign the POA and give the right to the agent to sign the agreement on their behalf. 

Stamp Duty on Lease Agreement

Stamp duty is supposed to be paid as per the stamp laws specified by the State Government. As per the Constitution of India, a stamp duty levied on a property is entirely a ‘State Issue’, and thus stamp duty on lease agreements varies from one state to another.

Stamp duty, in general, is dependent on various factors, including contract term, rental amount, premium, in addition to other sorts of premium specified in the lease agreement. Certain state governments have specified their circle rates. 

So, you will either find the amount of rent or the minimum circle rate specified in the agreement. Whichever out of the two comes out to be higher is required to be paid as rent agreement stamp duty.

How to Determine Rental Agreement Stamp Paper Value?

Four vital factors are taken into consideration to determine a rental agreement. These include: 

1. The location of the property is the foremost factor to determine the estimated stamp paper value.
2. The time frame of the rent agreement is another essential factor.
3. Short-term leases and long-term leases fall into different categories. Thus, they are subject to distinct stamp duty charges. It may vary from one state to another.
4. Annual rent of the property also accounts for the determination of the stamp paper value of the rent agreement, specifically in the case of commercial rental agreements.

You might consider the rent and lease agreement the same thing, but there is a fine difference between the two. It is important to understand the key difference to get the best possible real estate deal.

The primary variation between rental and lease agreements is the time frame they cover. A rental agreement covers a short period of time, typically up to 30 days. On the other hand, a lease agreement tends to cover longer time periods, typically 12 months or more.

However, the subtle difference between these two agreements does not reflect on stamp duty charges. Therefore, both lease and rental agreement stamp paper values remain the same.

Lease/Rent Agreement Stamp Paper Values Across Major States

The below-depicted table represents the value of stamp paper levied in lease and rent agreements across different states in India:  

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Payment Modes for Paying Stamp Duty on Rental Agreement

There are various payment modes through which an individual can easily pay stamp paper value for a rental agreement. These are as follows:

• NEFT
• Demand Draft
• Cash
• Pay Order
• Cheque

With the new e-stamping service, you can now easily pay the rent agreement stamp duty through the SHCIL Portal. 

Essential Documents for Rental Agreement Registration

You will require the following set of documents for rental agreement registration:

• The original proof to determine property ownership, like property deed title.
• Property related documents, including index, a tax receipt of the property to be rented, etc.
• Two passport size photographs of involved parties and witnesses.
• Copy of residence proof (both parties): Aadhaar Card/Ration Card/Bank Passbook/Driving License.
• Map of the rented property.

How is Rent Agreement Stamp Duty Calculated?

The charge of stamp duty on property generally falls between 5-7% of the market value of the property, along with a 1% registration charge on the same. These charges can start from thousands and go up to lakhs. To avoid any shortfall in the transaction of buying a house and registering it in your own name, make sure that you pay for both the stamp duty and registration charges.

In addition, you can count on a rent agreement stamp duty calculator. It is a handy tool that allows you to compute applicable stamp duty charges based upon certain entries. The factors that affect the calculation of stamp duty on rent agreement are as follows:

• The market value of the property when purchased
• Type of property (commercial or residential)
• Property size
• Location and area of the property
• The owner’s gender and age

Bottomline

Several factors have contributed to a surge in the frequency of tenant-landlord disputes throughout the years. No landlord or tenant wants to find themselves in a legal predicament. Thus, before getting into a renting scenario, it is critical to have the rent agreement recorded to avoid any undesired legal situations in the future. If the rental agreement is registered with the help of a local registrar, there’s a good chance you’ll be able to prevent any undesirable legal disputes.

FAQ’s about Stamp Duty For Rental Agreement