Stamp Duty evasion to be controlled by a new bill in Tamilnadu

A new bill Tamilnadu Amendment Act 2012 to control Stamp Duty evasion

With an aim to control the evasion of stamp duties in Tamilnadu, the government of Tamilnadu has introduced a new bill. This bill will also make the registration of power of attorney documents compulsory which are related to immovable properties. The commercial taxes and the registration department in 2011-2012 earned about Rs. 6,619.98 crore from the registration of 3.5 million documents.

Stamp Duty is a tax which is levied on documents and earlier included the majority of legal documents like cheques, receipts, military commissions, marriage licences and land transactions. Before the document was legally effective a physical stamp should be attached to the document to denote that the stamp duty has been paid. The modern versions of the tax do not require an actual stamp. This policy was introduced in 1624.

Emphasis of the Stamp duty

The Tamilnadu government has introduced the Indian Stamp; Tamilnadu Amendment Act 2012 in the state assembly for commercial taxes. This act imposes a 1 per cent stamp duty on construction agreements related to the buildings on undivided share of land. Also as mentioned earlier the act will amend to provide compulsory registration of property agreements.

Earlier the stamp duty was 6% which was a little less and it resulted in a huge loss of up to Rs.600 crore a year which was the policy note on stamps and registration. The stamp duty from April 1 will be a total of 8% which further includes 5 % stamp duty, 2% transfer duty and registration fee of 1%.

Real estate scenario

The new stamp duty policy was initiated, keeping in mind about the concepts of the real estate sector. The real estate developers flourish their business by either purchasing a land or by entering into a joint venture by the owner for the further constructions. In this case they register the sale deed only for the exclusive share of the land. On the other hand the developer moves into a separate construction agreement which is not required to be registered with the apartment buyer. Doing this will save them from paying stamp duties on the built-up area. In order to do justice to this, the government of Tamilnadu has imbibed its new policy related to the tax evasion. This will help the government to acquire the property tax for the complete project rather than just the exclusively owned land by the developer. This law plugs the loopholes for tax evasion.

The changes which were made in the Indian Stamp act 1800 also does away with the maximum limit of Rs. 10,000 on stamp duty payable on documents relating to partition and dissolution of partnership. This also consists of the situation of the release and settlement of the property among family members.

Apart from this another bill was initiated by the Tamilnadu minister to attract the stamp duty for mergers and restructuring of companies. This bill charges the stamp duty on the transfer of properties as a part of the reconstruction of companies or the amalgamation.

Adding on to this the Tamilnadu government introduced another bill to amend the Tamil Nadu VAT Act looking forward to deal with the aviation turbine fuel in tune with the central sales tax.

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