The proper payment of stamp duty and the registration of Rent Agreement in accordance with applicable laws are crucial. Failure to comply with these statutory requirements can result in serious complications.
The provisions of law relating to the registration of lease agreements are governed by the following Acts.
Relevant Sections
Section 107 The Transfer of Property Act, 1882 provides –
A lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.
Section 17(1) of the Registration Act, 1908 provides for the documents of which registration is compulsory.
Section 17(1), clause (d) provides-Leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent.
Section 18 of the Registration Act, 1908 provides for Documents of which registration is optional.
Section18 (c) provides exempt leases of immovable property for any term not exceeding one year.
Lease of immovable property for any term exceeding one year can be made only by a registered instrument.
It is not only compulsory under the law to pay proper stamp duty on Lease Deeds / Rent Agreements but also its registration if the lease term is more than a year.
In Delhi stamp duty is payable
- @ 2% of the average annual rent in case of Lease Deeds/Rent Agreements for a term upto 5 years and
- @ 3% of the average annual rent in case of lease agreements for a term greater than 5 years but upto 10 years.
Registration fee is payable @Rs.1100 . Click here for payment of the e-registration fee.
For Instance, If a property is let out for 3 years at a monthly rent of Rs.50,000 for the first 12 months, Rs. 60,000 subsequent 12 months and Rs.70,000 for the last 12 months.
The charges for registering this agreement would be:
Whether 11 months lease agreement made on Rs. 100 stamp paper is a valid document in Delhi?
Registration of Rent Agreement and payment of Stamp duty are two different subjects, although registration is not compulsory for Lease or Rent Agreement for a term of less than one year but proper stamp duty must be paid as per the applicable stamp laws.
Schedule 1-A of the India Stamp Act, 1899 as applicable to Delhi prescribes the Stamp Duty payable on different instruments.
Article 35 of the Schedule 1-A relates to Lease
Entry (a)(i) in article 35 relates to the lease for a term of less than one year. Under the head “Proper Stamp Duty” it states that the Stamp Duty as a bond (Number 15) for the whole amount payable or delivered under such lease.
In this regard article 15 relating to bond has to be seen. Article 15 prescribes Stamp Duty @ 2% and 0.5% on bond issued by local Authority.
In view of the above, it is clear that the stamp duty payable on the Lease/Rent agreements is governed by Article 35(a)(i) of Schedule 1-A.
The same shall be paid @ 2% not Rs.100/-
Consequences of non-payment or deficient payment of stamp duty & non registration of rent agreement.
The Lease Deed / Rent Agreement can be impounded and a hefty penalty of up to 10 times of the unpaid deficient stamp duty can be charged by the Collector of stamps.
As per section 17 of the India Stamp Act, 1899, the instrument chargeable with duty and executed by any person in India shall be stamped before or at the time of execution. Accordingly one must ensure full and requisite stamp duty has been paid before proceeding to execute the document. It should be kept in mind that stamp paper should be purchased either on or before the date of execution of the document otherwise the same can be impounded.
An unregistered and/or deficient stamped Lease Deed / Rent Agreement is not admissible as evidence in the court of law.
If the Lease deed / Rent agreement left unregistered that requires mandatory registration, the courts have termed the tenancy to be a month to month tenancy, terminable on a 15 days notice, by either of the parties.
This means that parties cannot enforce the agreed lease period.
Hon’ble Delhi High Court in Jeevan Diesel and Electricals Ltd. v Jasbir Singh Chadha RFA No. 179/2011 held that an unregistered lease deed cannot create a lease for a fixed period and unless the lease deed is duly registered the tenancy only remains a month-to-month tenancy.
Who has to bear the stamp duty?
In the absence of an agreement between the parties, as per section 29 clause (c) of the Indian Stamp Act, it is the responsibility of the Lessee/ Tenant to pay the stamp duty. As a standard practice, the stamp duty and registration charges are shared equally between the Lessee and Lessor.
Whether diplomat(s) are exempt from payment of stamp duty and registration of lease agreement ?
The exemption from payment of Stamp duty to the diplomatic missions is also based on the principle of reciprocity, i.e. exemption is granted only if Indian Mission in the respective country is granted the same exemptions as and when required.
What is the time limit for presenting the documents for registration of rent agreement under the law?
Section 23 of the Registration Act, 1908 provides time for presenting documents, Subject to the provisions contained in sections 24, 25 and 26, no document other than a will shall be accepted for registration unless presented for that purpose to the proper officer within four months from the date of its execution.
Process to follow for Registration of Rent Agreement
List of documents required for Registration of Rent Agreement.
- Original Lease Agreement (two sets)
- Stamp paper (with correct e-stamp value )
- E-Registration fee.
Documents required By the Lessee / Tenant
In case of a Company Lease.
- Original power of attorney / board resolution on company letter head.
- Original photo ID proof and its copy (Driving Licence, Passport, etc.) of the authorized signatory.
- Address proof of the authorized signatory.
- Two passport size color photographs of the authorized signatory.
- Copy of company PAN card.
- Original Aadhaar card of the authorized signatory and its copy.
- Company seal / stamp of authorized signatory.
In case of a Personal Lease
- Original photo ID proof and its copy (Driving License, Passport, etc.)
- Address Proof.
- Two passport size color photographs.
- Original Aadhaar card of the authorized signatory and its copy.
By the Landlord / Owner
- Original ownership documents (sale deed / conveyance deed etc).
- Original Aadhaar Card of Lessor.
- Two passport size color photographs.
- Original picture ID of Lessor (Driving License / Passport).
- Copy of PAN card.
Both Lessee and the Lessor have to present themselves (or through their duly constituted attorney) before the Sub Registrar for the execution and registration of the lease agreement.
The presence of two witnesses along with their Aadhaar Card is also required in the Sub Registrar office for the registration of lease deed.
For taking appointment to visit the Sub-Registrar office Click here
To know your Sub Registrar office in Delhi Click here
Compiled by: Rahul Vaidya [B.Com (Hons), LLB (DU) ]
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