Pattern of stamp duty on mortgage transactions:
In India, the legislatures of the various States comprised therein are empowered to enact laws for the rates of stamp duty in respect of certain instruments which include the instruments in respect of the mortgage-transactions. As such, most of the States in India have enacted their respective laws. For example, the Bombay Stamp Act, 1958 (for short “the Bombay Stamp Act”) applies throughout the State of Maharashtra.
Pattern of stamp duty on mortgage transactions: From the standpoint of the levy of stamp duty on the instruments pertaining to mortgage, the stamp duty provisions could be classified into four categories, namely,
- agreement relating to deposit of title deeds, the mortgage is by deposit of title deeds.
- mortgage where possession of the property or part of the property comprised in the deed is given by the mortgagor or agreed to be given
- where the possession of the property is neither given nor agreed to be given and
- where the mortgage deed is executed by a surety, which in legal/common parlance is also known as “third party mortgage”. The relevant Articles are: Article 6(1), Article 40 and Article 54.
Article 6(1) which applies to the first category prescribes different quantums of duty for different slabs of loan amounts, the maximum being Rs.50,000. Article 40 applies to the second category and the third category, both. For the second category duty payable is the same as is leviable on the conveyance (conveyance attracts duty as per Article 25 of the said Act of 1958 where there is no ceiling on the maximum payable). For the third category, the duty is payable at the rate of ten rupees for every five hundred rupees or part thereof for the amount secured subject to the maximum duty being Rs.2,00,000/-. In the case of the fourth category, the duty is payable on the same pattern as the third category.