Bengaluru, 21 June, 2025 – The Karnataka government is actively considering a 1% increase in stamp duty on property transactions to bridge a substantial shortfall in property registration revenue during the first quarter of FY 2025–26. The move could increase the overall transaction cost for homebuyers and real estate investors in the state, where the current cumulative stamp duty, registration charges, and surcharges amount to about 6.6%. If implemented, the total cost could rise to approximately 7.6%.
Revenue Deficit Triggers Proposal
Karnataka had targeted ₹28,000 crore in property registration revenue for the fiscal year. However, only ₹4,556 crore was collected in Q1 (April to June), falling short of the ₹7,000 crore quarterly goal. This marks a steep 35% deficit. In the previous fiscal (2024–25), despite revising the original ₹26,000 crore target down to ₹24,000 crore, the state ultimately collected only ₹22,500 crore. In response, Chief Minister Siddaramaiah convened a high-level meeting with finance and registration officials on June 18, where a stamp duty hike was proposed as a corrective measure.
Understanding Stamp Duty
Stamp duty is a state-level indirect tax imposed on the execution of various legal documents, most significantly sale or transfer deeds for immovable property. It is governed by the Indian Stamp Act of 1899 and enforced by individual states with variations in rate and implementation. Along with a registration fee (typically 1%), stamp duty validates property transactions and makes them admissible in court. In Karnataka, the stamp duty currently ranges from 2% to 5%, depending on the value of the property, with additional cess and surcharges.
How Stamp Duty Is Calculated
Stamp duty is calculated based on either the guidance (circle) value or the market value of the property—whichever is higher. For properties exceeding ₹45 lakh, Karnataka presently levies 5% stamp duty, plus 1% registration fee, 0.5% cess, and 0.1% surcharge. For smaller properties, rates are 2% for values below ₹20 lakh and 3% for properties between ₹20 lakh and ₹45 lakh. The proposed 1% hike would apply across slabs and bring the total transaction cost for higher-value properties to 7.6%.
Comparisons with Other States
Even after the proposed increase, Karnataka’s rates would still be lower or comparable to other major states. Tamil Nadu imposes a combined duty of 11%, and Maharashtra levies 6% for men and 5% for women buyers, plus a 1% registration fee. Delhi maintains a similar tiered structure, with concessional rates for female buyers. Several states, such as Andhra Pradesh and Gujarat, offer slightly lower base rates but compensate with higher surcharges or limited exemptions.
Impact on the Property Market
The proposed hike has sparked concern among developers and industry bodies. T. Bhaskar Nagendrappa, president of CREDAI Bengaluru, argues that the shortfall in revenue is primarily due to technical issues—particularly glitches in the Kaveri online registration portal and delays in implementing the e-Khata system. He warned that increasing transaction costs could deter buyers and slow down the real estate market, especially in a post-pandemic environment where affordability remains a key factor.
Further, he noted that guidance values in the state were already increased by 30–40% in 2023, pushing up the minimum valuation benchmark used to calculate stamp duty. Adding another layer of cost could discourage registrations, especially in the mid-income housing segment.
Gender and Age-Based Concessions
Several Indian states, including Maharashtra and Delhi, provide concessions to women buyers, usually 1–2% lower than the standard rate. These measures are designed to encourage female property ownership and financial independence. Some states also offer age-based exemptions for senior citizens or special rates for first-time buyers. Karnataka currently offers no widespread gender-based concessions, though such policies may be re-evaluated in future reforms.
Modes of Payment and Penalties
Most property transactions in Karnataka now use e-stamping through licensed vendors or online systems. This method is secure, transparent, and eliminates the risk of counterfeit stamp papers. However, buyers should ensure that stamp duty is paid in full and on time, as non-compliance can attract a penalty of 2% per month, up to a maximum of 200% of the unpaid amount.
Tax Benefits on Stamp Duty
Under Section 80C of the Income Tax Act, homebuyers can claim deductions of up to ₹1.5 lakh for stamp duty and registration charges when purchasing a new residential property. However, this benefit is available only in the year of property registration and cannot be claimed for resale or commercial properties.
Alternatives to a Hike
While the hike is intended to plug the revenue gap, experts suggest that improving the efficiency of digital registration systems and ensuring smooth implementation of e-Khata could yield better results. Streamlining technical processes, increasing weekend registration slots, and reducing red tape would likely encourage higher volumes of registrations without raising costs.
What Lies Ahead
The Karnataka government has not yet taken a final call on the proposal. Deliberations are still underway, and any revision in stamp duty will require an official notification and possible legislative amendment. Stakeholders are urging the government to focus on system reform rather than increasing buyer costs during a fragile market recovery phase.
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