What is stamp duty and why is it charged?

In India, stamp duty is a type of tax levied on certain documents, including property transactions, to make them legally valid and enforceable. It is governed by the Indian Stamp Act, enacted by the central government but implemented by state governments. Stamp duty is charged to ensure the proper recording of various transactions and to maintain an official record of legal documents.

The primary purpose of charging stamp duty is to provide legal recognition and evidentiary value to documents. When a document is stamped with the appropriate duty, it becomes admissible as evidence in a court of law. It helps establish the authenticity, validity, and terms of the transaction, thus protecting the rights and interests of the parties involved.

Stamp duty is typically charged on a variety of transactions, such as property purchases, lease agreements, mortgage deeds, power of attorney, loan agreements, and partnership deeds, among others. The rate of stamp duty varies from state to state and depends on the nature of the document and the value or consideration involved in the transaction.

The revenue generated from stamp duty is an important source of income for state governments. It is utilized for various developmental and administrative purposes, including infrastructure projects, social welfare programs, and public services. The revenue helps in funding public initiatives and promoting economic growth in the respective states.

It is important for individuals involved in any transaction subject to stamp duty to ensure proper payment and adherence to the stamp duty regulations of the respective state. Nonpayment or underpayment of stamp duty can lead to penalties, fines, or even invalidation of the document. Therefore, it is crucial to consult the concerned state's stamp duty laws and pay the appropriate amount while executing any document or transaction.