In Karnataka, Article 5 of the Karnataka Stamp Act, 1957 governs the stamp duty payable on various legal agreements. One of the most crucial subsections is Article 5(E), which covers the Sale Agreement for Immovable Property. This article outlines the requirement of paying a 0.5% stamp duty on the property sale price during the e-stamp generation process. The stamp duty paid at this stage can be claimed during the final property registration process, effectively reducing the overall registration fee.
While this process might seem straightforward, many individuals and even legal professionals sometimes make the mistake of using Article 5(J) (Other Agreements) instead of Article 5(E) when generating the e-stamp for a sale agreement involving immovable property. This mistake can lead to legal complications and delays in the registration process.
What is Article 5(E)?
Article 5(E) of the Karnataka Stamp Act, 1957, deals with agreements related to the sale of immovable property, including land, apartments, and other types of real estate. According to the law, when drafting a sale agreement, the buyer must pay 0.5% of the total property sale price as stamp duty at the time of e-stamp generation.
Example: If you are purchasing a plot of land for INR 1 crore, the stamp duty at the time of generating the e-stamp will be 0.5% of INR 1 crore, i.e., INR 50,000. This amount will later be adjusted against the total stamp duty payable when the sale deed is registered.
Key Features of Article 5(E)
Applies to immovable property: Only sale agreements involving real estate fall under Article 5(E).
Mandatory 0.5% stamp duty: This must be paid upfront during e-stamping and is based on the total sale price of the property.
Claimable at registration: The 0.5% stamp duty paid during e-stamping can be claimed when registering the property, reducing the overall registration cost.
Common Mistake: Misuse of Article 5(J) (Other Agreements)
A widespread error in property transactions is using Article 5(J) instead of 5(E). Article 5(J) is meant for other agreements, such as general contracts, and not for property sale agreements. However, because both articles involve generating an e-stamp, people often mistakenly choose Article 5(J), thinking it covers all types of agreements.
Consequences of Using Article 5(J) for Property Sale Agreements:
Legal Complications: Since the e-stamp generated under Article 5(J) is not meant for property transactions, it may not be accepted during the property registration process.
Delays in Property Registration: Incorrect e-stamping can cause delays, as the registration office might require fresh documentation or additional fees.
Increased Costs: If the mistake is identified too late, you may have to pay the stamp duty twice or incur extra fees to correct the error.
Loss of Time and Resources: Redoing the paperwork and making the correct payments can lead to wasted time, unnecessary expenses, and frustration.
How to Avoid This Mistake?
Be vigilant when generating e-stamps: When drafting a sale agreement for property, ensure that you choose Article 5(E) in the e-stamping portal.
Consult with a legal expert: If you are unsure which article to choose, it’s best to consult with a lawyer who is experienced in property transactions and the Karnataka Stamp Act.
Double-check the details: Always double-check the property sale agreement and the corresponding e-stamp article to avoid complications during registration.
E-Stamping Process for Sale Agreement in Karnataka
To avoid errors and ensure smooth property registration, here is a step-by-step guide to generating an e-stamp under Article 5(E) for immovable property:
Visit the E-Stamping Portal: Go to the official Karnataka E-Stamping Portal (such as K2 system or SHCIL).
Select the Correct Article: For property sales, ensure you select Article 5(E) (Sale Agreement for Immovable Property).
Enter the Sale Amount: Enter the total sale price of the property in the designated field.
Calculate Stamp Duty: The system will automatically calculate 0.5% of the total sale price as the stamp duty payable.
Generate E-Stamp: Once the payment is made, an e-stamp certificate will be generated, which can be printed and used during the sale agreement execution.
Use E-Stamp During Registration: At the time of property registration, present the e-stamp certificate and the stamp duty paid will be adjusted against the total registration charges.
Complete List of Agreements Under Article 5 (Karnataka Stamp Act, 1957)
Article 5(A): Sale of Bill of Exchange
This pertains to agreements related to the sale of a bill of exchange, where a party agrees to pay another a specific amount at a future date.
Article 5(B): Sale of Government Securities
This covers agreements for the purchase or sale of government securities like bonds and treasury bills, where stamp duty is applied.
Article 5(C): Purchase/Sale of Securities
C(I): This section deals with the purchase or sale of securities other than government securities.
C(II): This subsection focuses on securities traded on recognized stock exchanges.
Article 5(D): Lease Cum Sale Agreement
This relates to agreements where a property is leased with an option to purchase at a later date, often seen in real estate.
Article 5(E): Sale Agreement for Immovable Property
Most Important: This section is used for agreements related to the sale of immovable property (land, buildings).
In Karnataka, the government mandates a 0.5% stamp duty on the property’s sale price at the time of e-stamp generation for sale agreements under this article. This 0.5% can be claimed during the final property registration.
Mistake: Many people wrongly use Article 5(J) (Other Agreements) for property sale agreements, which can lead to complications as the stamp duty under 5(E) is crucial for reclaiming during property registration.
Article 5(F): Joint Development Agreement (JDA)
This applies to agreements between landowners and developers to develop the land for mutual benefit, common in real estate projects.
Article 5(G): Sale of Movable Property
Agreements for the sale of movable assets, like vehicles or machinery, are covered under this clause.
Article 5(H): Mortgage Agreement
This section covers agreements related to mortgage transactions where a property is used as collateral for a loan.
Article 5(I): De-Mat Account Agreement
Agreements related to opening and operating a Dematerialized (De-Mat) account for holding securities in electronic form.
Article 5(I-A): Broadcasting/Telecasting/Trading Account Agreement
This deals with agreements for broadcasting, telecasting, or trading accounts, especially relevant in the media industry.
Article 5(I-B): Intellectual Property Rights Assignment/Transfer Agreement
This section governs agreements for the transfer or assignment of intellectual property rights, like patents or trademarks.
Article 5(I-C): Works Contracts Agreement
Agreements for work contracts, particularly those related to construction, renovation, or maintenance projects.
Article 5(J): Other Agreements
This is a catch-all category for agreements that do not fall under any other specific sub-sections of Article 5.
Important Note: 5(J) should not be used for immovable property sale agreements, as 5(E) is the correct clause. Many mistakenly use 5(J) for property agreements, resulting in issues later with stamp duty and registration.
Conclusion: Avoiding Mistakes in E-Stamping
To ensure a smooth property transaction and avoid costly mistakes, always make sure to use Article 5(E) for immovable property sales. This article guarantees that you are compliant with the Karnataka Stamp Act, 1957, and ensures that the 0.5% stamp duty you pay can be claimed at the time of registration.
Disclaimer
This information is provided for educational purposes and should not be construed as legal advice. For legal interpretations or to understand how Article 5 applies to specific circumstances, it is recommended to consult a qualified legal professional. #SairamLawAssociates #EcoSpaceRealtors #KarnatakaStampAct #PropertySaleAgreements #Article5E #StampDutyKarnataka #RealEstateLegal #ImmovableProperty #AvoidLegalMistakes #PropertyRegistration #PropertyEStamping #BangaloreRealEstate #RealEstateTransactions #ImmovablePropertySale
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