Renting in UP? Proposed Rs 1,000 stamp duty: What tenants, landlords must know

Recently, the Uttar Pradesh government announced plans to revamp the state's tenancy rules, including changes to the stamp duty and registration charges that are applicable to rental agreements.At a press conference, Ravindra Jaiswal, Minister of State for Stamp and Registration Fees, said the state government was considering a stamp duty of Rs 1,000 on rent agreements where the annual rent amounts to Rs 2 lakh.

What is the current trend?

Under Indian law, residential rent agreements covering a period of 11 months do not require compulsory registration, according to an ET report. This is one reason why 11-month agreements are so common.One drawback of verbal or unregistered rental arrangements is the difficulty of establishing proof. Such agreements generally cannot be relied upon as evidence unless a court permits their use.Circle rates are another factor behind the widespread practice of keeping residential tenancy agreements unregistered.Also Read | Homebuyers paid Rs 2.06 crore but got no flat, builder said payments meant accepting delay; Bombay HC orders interest payout from 2017 saying RERA allows for unconditional right to monthly interest

How could the proposed UP rent law benefit tenants and landlords?

The proposed changes could offer practical advantages to both tenants and property owners, particularly by making it easier and less expensive to register rental agreements.

Legal experts expect the proposed changes to complement the Uttar Pradesh Urban Premises Tenancy Regulation Act, 2021.Malav Virani, Partner at MDP Legal, told ETthat the government's primary concern was the low rate of registration of rent agreements across the state.Under the existing system, stamp duty and registration charges for tenancy agreements were calculated as a proportion of the rent, at roughly 4%, based on four times the property's circle rate.Virani explained that this formula could result in a substantial stamp duty burden even when the rent agreed upon was relatively modest.To avoid these expenses, many landlords and tenants opted for verbal arrangements rather than entering into written agreements. Even when they prepared written documents, they often left them unregistered.Also Read | She bought shares for Rs 13.5 lakh and sold them for Rs 77.47 lakh after 18 months; taxman denied capital gains exemption, but ITAT gives relief and deletes Rs 79 lakh in additionsAccording to Virani, the reforms are intended to make the Act easier to implement by addressing the cost of registering tenancy agreements, which has discouraged people from doing so.

Another objective is to reduce landlord-tenant disputes reaching the courts because the parties lack properly documented agreements or rely on informal arrangements.Virani said the lower stamp duty and registration costs would provide relief to tenants and encourage them to formalise their rental arrangements. Registering an agreement would also help tenants secure the protections available under the Act.Virani says: “Armed with a registered agreement, tenants will enjoy a strong legal standing with proof of tenure, agreed rent, and other terms being documented.” Such records could prove important if a landlord tries to evict a tenant unlawfully, challenges the agreed rent or denies that a tenancy arrangement exists.Having a properly registered agreement is intended to strengthen the legal position of both parties and discourage practices that violate their contractual rights.Landlords, too, stand to benefit because the terms of the tenancy would be recorded in writing and formally registered.According to Virani, this documentation can help protect property owners if a tenant refuses to leave after the agreement expires, defaults on rent payments or commits similar breaches of the tenancy terms.Also Read | He bought a home, gave it for redevelopment years later and sold new flat for Rs 1.95 crore within 8 days; taxman denied LTCG exemption and added Rs 80.14 lakh, but ITAT grants relief