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Stamp Duty on Rental Agreement: What is It and Where is It Used?

Stamp Duty On Rental Agreement

A rent agreement is a legal document that acts as a contract between the tenant and landlord of a particular property. The agreement exists for a select period of time and contains pre-discussed conditions which must be followed by the tenant. The agreement gives the tenant a temporary right of possession of the said property till its renewal. The norms specified in the agreement can be changed by discussing with the landlord.

Unless this agreement is registered, it does not stand legal so to register a rent agreement, the tenant has to pay registry charges and stamp duty. Nevertheless, this payable amount varies from city to city and is paid by purchasing the rent agreement stamp paper that you owe to the government.

However, is it necessary? If yes, what is the value of the rent agreement stamp paper? Given the onset situation, is it possible to apply online and does it have the same value as the physical paper?

Let’s find out answers to these stamp duty and rental agreement questions from the article below, shall we?

First Things First, Is Paying a Rent Agreement Stamp Duty Necessary?

First Things First, Is Paying a Rent Agreement Stamp Duty Necessary

Stamp duty of the property is the contract made legally under Section 3 of the Indian Stamp Act, 1899. Therefore, it is important to pay the stamp duty as it is the charge levied on different property transactions that the government charges.

This payment of the lease is to be made as soon as you buy a property and also when you choose to go in for a rental agreement.

Rent Agreement Stamp Paper As Per The Different Indian states!

Rent Agreement Stamp Paper As Per The Different Indian states

The stamp duty of a particular property’s rent agreement is the contract made legal under the Indian Stamp Act of 1899, Section 3. Therefore, it is important to pay stamp duty as it is the charge the government levies on different property transactions. This payment of the lease is to be made as soon as you buy a property and also when you choose to go in for a rental agreement.

Here is a sample rent agreement stamp paper:

This agreement was made at __________ (city, state) on this __________ (date, month, year) between __________ (name of the landlord), residing at __________ (landlord’s residential full address) hereinafter referred to as the ‘LESSOR” of the one part and __________ (name of the tenant), residing at __________ (tenant’s full address) hereinafter referred to as the ‘LESSEE’ of the other part.

The terms LESSEE/TENANT and LESSOR/OWNER shall mean and include their respective legal heirs, representatives, assigns, successors, etc. while the LESSOR/OWNER is the owner and possessor of property number ________ (address of the property, falling in the category __________ (residential property/farm house/apartment/independent house) and has agreed to let out __________ room, ________ toilet, and __________ bathroom set on the said property with an extent of __________ square feet to the LESSEE/TENANT who has agreed to pay Rs.__________/- per month (in words) for the same.

Now, this rent agreement is witnessed as under

  1. That the LESSEE/TENANT will pay Rs.__________/- (in words) as monthly rent excluding water and electricity charges.
  2. That the LESSEE/TENANT shall not lease the said property to any subtenant without the consent of the LESSOR/OWNER.
  3. That the LESSEE/TENANT shall abide by the local rules in respect of the leased property and will not get involved in illegal activities in the leased property.
  4. That this agreement or lease is granted for a period of __________ months starting from __________ (date of rent commencing from) and this contract will be further extended under the mutual consent of the LESSEE and the LESSOR as per the current rental value in the market.
  5. That the LESSEE/TENANT shall pay the electric and water charges generated based on consumption to the LESSOR/OWNER.
  6. That the LESSEE/TENANT shall not construct anything in the rented premises other than installing temporary decorations, air conditioners, wooden partitions, etc. without prior permission of the LESSOR/OWNER.
  7. That the LESSEE/TENANT will not alter the rented premises without written consent from the LESSOR/OWNER.
  8. That the LESSEE/TENANT will allow the LESSOR/OWNER or an authorized agent to enter the rented premises for general inspection or repair work as and when needed.
  9. That the LESSEE/TENANT shall keep the rented premises clean and will not involve in any activity that causes issues to the neighbours.
  10. That the agreement or contract can be revoked before the expiry of the previous tenancy period by serving a one-month notice.
  11. That the LESSEE/TENANT shall bear the cost of day-to-day minor repair in the rented premises.
  12. That the LESSEE/TENANT shall not keep any explosive, dangerous, or offensive articles on the rented premises.
  13. That the LESSEE/TENANT shall pay a month’s rent in advance to the LESSOR/OWNER which will be adjusted in the subsequent month’s rent.
  14. That both the parties, the LESSOR and the LESSEE, have read and understood the norms of this agreement and have signed to confirm the agreement with no pressure from either side.

In witness whereof the LESSEE/TENANT and the LESSOR/OWNER have hereunto subscribed their hand at __________ (place) on __________ (date, month, and year), in presence of the following witnesses:

  1. ____________
  2. ____________

__________ (name of the LESSOR/OWNER)

__________ (name of the LESSEE/TENANT)

This is a tabular representation of the stamp duty charges as per the different states in India:

Delhi Up to 5 years 2%
Noida Up to 11 months 2%
Karnataka Up to 11 months 1% of the total rent + annual deposit paid, or Rs 500 (whatever is lower)
Tamil Nadu Up to 11 months 4% of rent + deposit money
Uttar Pradesh Less than a year 4% of the annual deposit + deposit
Maharashtra Up to 60 months 0.25% of the total rent
Gurgaon Up to 5 years 1.5% of the average annual rent
Gurgaon 5-10 years 3% of annual average rent

What is the Value of Stamp Duty?

Stamp Duty on Rental Agreement: What is It and Where is It Used? 4

Certain factors decide the value of stamp duty such as

  1. Premises
  2. Location
  3. Duration of the rent agreement

The value of the rent agreement stamp paper is based on if it’s a short-term or a long-term lease and differs from state to state. Therefore, it’s best to research the stamp duty rate of your residing state. Besides these, the annual rent is also an important factor, especially when it comes to commercial rental agreements.

Does Stamp Duty Link to The Month-on-month Rental Stay of The Tenant?

Stamp Duty on Rental Agreement: What is It and Where is It Used? 5

In a broader sense, a month-on-month stay could be written on the stamp paper too without any registration. However, the rent agreement stamp duty is more than that since it is required for both, short-term to long-term stays

What is the Stamp Duty of a Backdated Rental Agreement in Real Estate ?

Stamp Duty on Rental Agreement: What is It and Where is It Used? 6

In simple words, a rental agreement in real estate can only be given in the retrospective effect, within the terms of the agreement. This means, there is no way for the stamp duty charges to be backdated.

Who Must Buy A Rent Agreement Stamp Paper ?

Purchasing stamp paper is the duty of the landlord or the tenant and whoever chooses to do so would continue to be the purchaser. That means, if the landlord or the tenant wishes to own the originals, they must buy the stamp paper themselves, otherwise, they can keep the photocopy or the scanned version from the other party.

Stamp Duty And Registration

Stamp Duty And Registration The Significance

Why is Registration Important?

The registration of a rent agreement is the creation of legal proof of the tenancy and leasing of the property in question. Here are the advantages that registration provides:

  1. Prevents frauds and/or forgeries
  2. It acts as proof that the document was prepared by the parties mentioned in the deed
  3. Offers transparency and clarity
  4. Reveals the feuds, liabilities, and debts in the property’s name

How to Register Rent Agreements Online? Also, is e-Stamping Valid?

Stamp Duty And Registration. How to Apply Online And, is e-Stamping Valid

There are online sites that have now launched virtual rental agreement facilities. By applying online, the physical presence of the tenant or the landlord is not needed to complete the rental agreement process.

All that’s needed is to:

  1. Fill out the details
  2. Sign the agreement, digitally
  3. Get the rental agreement e-stamped

Speaking of its relevance, e-stamping is surely valid in certain states, therefore, it’s best to check before moving forward. Simply log on to the Stock Holding Corporation of India Ltd (SHCIL) website and figure out if your state offers e-stamping.

To Conclude: The Documents Needed to Register a Stamp Duty

1) Documents that the landlord needs to present for registration –

  • Original copy proof of ownership of the property
  • 2 passport size photos
  • Aadhar card
  • Any government-issued ID proof like driving license, voter’s ID, passport, etc
  • The rental agreement printed on the Stamp paper for more value 

2) Documents that the Tenant needs to present for registration –

  • 2 passport size photos
  • Aadhar card if Indian. If not, the office will need his/her original passport
  • A board resolution/authorization letter validating the person’s right to register the lease
  • Company seal if registered by the company

If representing another person for the registration – The power of Attorney should be presented

Stamp Duty On Rental Agreement FAQs:

Why is a rent agreement stamp paper necessary?

A rent agreement on stamp paper comes in handy when you interact with HRA claims, banks, school applications, vehicle purchases, gas distribution, telephone connections, etc. They ask for the rent agreement with stamp duty as your proof of address.

2) Do stamp papers have an expiry date ?

Stamp papers can be used for 6 months after purchase. If you have unused ones, they must be given back to the collector within 6 months expiry date for a refund. Using stamp papers older than 6 months after purchase is not legal.

3) Is the rent agreement registration compulsory ?

If you have a rent agreement for less than a year, you will be required to provide stamp duty. But no registration. Rent agreements drawn up for a year or more needs to be registered without stamp duty.

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