What is the Role of Stamp Duty and Registration Fees in Home Loan?

July 03, 2025

role-of-stamp-duty-and-registration-fees-in-home-loan-processing

The process of financing a home can be complex and overwhelming, especially when it comes to understanding the role of stamp duty and registration fees. In this article, we will demystify these charges and provide you with a comprehensive guide to help you navigate through the property purchase costs and the charges involved.

 

When you take a Home Loan it's essential to consider not only the loan amount but also the additional expenses associated with buying a property. Stamp duty and registration fees are two significant components of these expenses. Let's explore what they are and how they impact your home loan financing. 

 

The Role of Stamp Duty in  Home Loans

Stamp duty is an indirect tax that must be paid to legalise property ownership. It applies to various documents involved in property transactions, such as sale deeds, conveyance deeds, and power of attorney papers. The payment of stamp duty is essential for claiming these documents and establishing legal ownership of the property

 

Example: Let's say you're buying a property worth ₹80 lakh in Mumbai, where the stamp duty rate is 5%. The stamp duty amount would be ₹4 lakh (5% of ₹80 lakh). 

Loan Amount

 

Stamp Duty Rate

 

Stamp Duty Amount

 

₹80,00,0005%₹4,00,000

 

In most cases, banks do not include stamp duty in home loans. So, in the above case, if your bank does not include stamp duty in home loans, you  need to arrange the ₹4 lakh through your internal funding. On the other hand, if it permits stamp duty as part of home loans, you can add ₹4 lakh to the loan amount you are availing. 

 

The Role of Registration Fees in  Property Purchase 

Registration fees are charges levied by the state government for registering a property transaction. These fees ensure that the property is legally transferred to the buyer's name.

 

Let's continue with the previous example of buying a property worth ₹80 lakh in Mumbai. If the registration fee is 1% of the property value, you would need to pay ₹80,000 as registration fees. 

 

While registration fees are not included as part of the home loans component by most banks, if they are, you can add it to the home loan you are availing. 

 

The registration fees and stamp duty are essential components of your property purchase cost. While they may seem like additional expenses, it's important to remember that they are mandatory and unavoidable when buying a property.

 

How Do Stamp Duty and Registration Fees Impact Home Loans?

  • Stamp duty and registration fees are typically not included in the home loan amount approved by the lender. They are out-of-pocket expenses for the buyer. However, you need to check with your bank to see if they are allow the addition of stamp duty and registration fees as part of home loans. 
  • Buyers must pay these charges separately in addition to the home loan amount. Failing to pay stamp duty means the buyer is not considered the legal owner. 
  • Stamp duty and registration fees can add significantly to the upfront costs of buying a home. Buyers should budget for these expenses in addition to the home loan EMI. 
  • However, there are some tax benefits available. Stamp duty and registration charges are eligible for a tax deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act.

Final Thoughts

Understanding the role of stamp duty and registration fees in home loan financing is crucial for homebuyers as they navigate the financing process. These costs not only influence the total price of a property but also impact loan approvals and budgeting strategies. Prospective buyers should be aware of these fees, seek advice on potential exemptions, and plan accordingly to ensure a smooth home-buying experience.

 

Ujjivan SFB have tailor-made home loan products that can meet your requirements. Talk to them today!. 

 

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The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

 

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FAQs

1. What are the typical home loan charges?

The typical home loan charges include processing fees, legal charges, pre-payment charges, insurance charges, late payment fees, stamp duty, registration fees, etc. 

2. What are the processing loan charges for home loans?

The processing loan charges differ across banks and may range from 1% to 3% of the loan amount plus GST. Check with your bank for better understanding.

3. Are stamp duty and registration fees applicable on resale properties as well?

Yes, stamp duty and registration fees are applicable on both new and resale properties.

4. What happens if I don't pay stamp duty?

Non-payment of stamp duty can result in legal consequences, as it is a mandatory requirement for property transactions.

5. How long do I have to pay stamp duty after buying a property?

Stamp duty should be paid within a specified period after the execution of the property agreement. The time frame varies from state to state.

6. Can I claim tax benefits on stamp duty and registration fees?

Tax benefits on stamp duty and registration charges are available under Section 80C of the Income Tax Act, 1961, allowing taxpayers to claim deductions for these expenses incurred during property transactions.

7. Does cost of the property increase the stamp duty and registration fees?

Yes, property purchase costs may increase with registration and stamp duty. The extent it increases depends on the charges levied by the state governments for the same. 

8. How can I calculate my home loan EMI?

You can use an online home loan EMI calculator to calculate your monthly repayments. The calculator takes into account factors such as the loan amount, interest rate, and tenure to provide you with an estimate.

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