Now, pay more for your home loans

The resources-starved state governments are latching on to every avenue for boosting revenues. Recent reports talked about Rajasthan government objecting to insurance companies issuing policies at a central location andpaying stamp duty in the state where the policies are printed.

The Maharashtra government has now amended the Bombay Stamp Act to levy stamp duty on all loans including those taken by individuals. So home loans, personal loans, consumer durable loans and all other retail loans now attract stamp duty.

When you took a housing loan till now, all that you paid as stamp duty is Rs 100. That's when the lender made you sign the loan agreement on a stamp paper of Rs 100.

There was no such levy on other loans taken by individuals. All this has changed now in Maharashtra, which accounts for nearly one-third of all loans given by the banking sector.

Home loan seekers will now have to pay 0.25 per cent more upfront for loans upto Rs 10 lakh (Rs 1 million) and 0.50 per cent for loans over Rs 10 lakh. For all other retail loans, stamp duty will be 0.25 per cent of the loan amount.

Banks are asking the government to reconsider its decision with regard to home loans as the loan seeker also pays a 10 per cent stamp duty on the purchase value of the house.

The Article 6 of the Bombay Stamp Act, 1958 provides for agreement relating to deposit of title deeds, which means there shall be an agreement relating to deposit of title deeds which shall attract stamp duty as prescribed.

Banks are, however, arguing that it should also be noted that the applicable substantive law for the mortgages of the central government, viz Transfer of Property Act, 1882, recognises and in turn permits creation of mortgage by deposit of title deeds without any requirement of execution of any document for creation of mortgage. Hence, there cannot be any stamp duty on deposit of title deeds.

If the state government accepts this argument, then home loan borrowers might be spared of having to incur an additional expenditure.

But representations for exempting other loans availed by individuals frompayment of stamp duty might not be exempted.

Impact:

HOME LOAN -- Stamp Duty: