The Tamil Nadu Government is tightening Stamp Duty and Registration laws to prevent evasion of taxes on property transactions.

The Indian Stamp (Tamil Nadu Amendment) Act, 2012, introduced in the Assembly today, provides for levy of 1 per cent stamp duty on construction agreements relating to buildings on undivided share of land. The Registration Act will also be amended to provide for compulsory registration of such agreements.

Real estate developers either buy a plot of land or enter into a joint venture with land owners to construct apartments. They register the sale deed only for the undivided share of land. The developer enters into a separate construction agreement – that need not be registered – with the apartment buyer. This helps them to get around the stamp duty on the built up area. The proposed change in the law plugs this route for tax evasion. From April 1, Tamil Nadu levies a total of 8 per cent duty including 5 per cent Stamp Duty, 2 per cent Transfer Duty and a Registration Fee of 1 per cent. Previously, the Stamp Duty was 6 per cent. This reduction in Stamp Duty means the State loses over Rs 600 crore a year, according to the Policy Note on Stamps and Registration.

The amendment to the Indian Stamp Act, 1899, also does away with the maximum limit of Rs 10,000 on stamp duty payable on documents relating to partition, dissolution of partnership and release and settlement among family members.

The limit was set in 2004 but property values have increased several-fold since then.

Through another proposed amendment, the Registration (Tamil Nadu Amendment) Act 2012, to the Registration Act, 1908, the Government is making it compulsory to register Power of Attorney documents relating to immovable property.

In 2011-12 Commercial Taxes and Registration Department earned Rs 6,619.98 crore from the registration of 35 lakh documents.

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