Stamp duty on rent, lease agreements increased steeply in Kerala

Thiruvananthapuram: The stamp duty on rent and lease agreements has been increased sharply in Kerala. The new regulations significantly increase the stamp duty on rent and lease agreement, along with mandating registration for all such agreements, including short term ones.

Consequently, registration of rent and lease agreements in agricultural and commercial sectors will become more expensive. These measures are as per the provisions of the Finance Bill passed along with the State budget. Until now, registration of contracts for an 11-month period was not mandatory; however, it is now imperative to register them. The stamp duty for this procedure has been jumped from Rs 200 to Rs 500.

Typically, tenancy agreements are drafted for an 11-month period for most houses and small businesses. With the implementation of this new system, a stamp duty of 8% is payable on a fixed percentage of the fair value divided into several slabs, depending on the tenure of the lease agreement. For contracts transferring only buildings, the stamp duty will be based on the fair value of the land on which the building is situated, the gross rent, or the advance amount, whichever is higher.

A final decision on registration fees for lease and rental agreements based on fair value is pending until after the upcoming Lok Sabha election. Agreements registered now have to pay stamp duty at the new rate and registration fee at the old rate. However, the new rate is not being charged due to the uncertainty at the sub-registrars’ offices regarding this.

Collecting fees poses challenges
Despite the issuance of notification to apply increased rates based on the fair value of land for stamp duty and registration of rent and lease agreements, experts highlight the difficulty in enforcement. The main obstacle is the non-registration of contracts by many establishments, including government institutions. Contracts are mainly registered by large financial and commercial institutions. This is done for income tax and GST purposes and for availing exemptions. But government establishments such as the Beverages Corporation, Consumerfed, companies, boards and cooperative banks and societies do not register contracts.

Currently, the Registration Department lacks the authority to take action against entities that fail to register contracts. Additionally, 85% of land survey numbers in the State have not had their fair value determined. In areas where fair value is undetermined, the market value can be calculated but this responsibility lies with the Revenue Department. The revenue department fixes the price in this manner when issuing solvency certificates for any purpose or acquiring the land for government purposes.