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Tax benefit on Stamp Duty & Registration Charges of a Property

Amitav 
on 20 November 2017

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Stamp Duty and Registration Charges are the heftiest expenses which have to be paid while buying a house to get the property transferred in your name.

Stamp duty is a state levy paid to register a document, whereas a registration fee could be considered a processing fee. Typically, these are a percentage of the property's value, and their rates vary across states. Stamp duty and registration fee are charged on the transaction value or circle rate (minimum price of property, for assessment purposes), whichever is higher. 

Stamp duty can be as high as 8% of the property value and registration charges could roughly be near 1% of the property value. So total of both becomes around 8%-10% of the house cost.

This rate may vary from state to state, Urban areas to Rural Areas and on the basis of gender on whose name the property is registered. The Stamp duty and registration charge is mandatory and is levied by the Government of India.

Tax benefit:

Government has provided relief in respect of payment of this duty and charge. Stamp duty & registration charges and other expenses which are directly related to the transfer are allowed as a deduction under Section 80C (2) (xviii) (d) of the Income-tax Act, 1961, up to a limit of Rs1.5 lakh.

Conditions for Tax Benefit:

The Conditions for claiming Stamp Duty and Registration Charges deductions u/s 80C are:

  • This deduction can only be claimed in the year the actual payment is made towards these expenses. Both an individual and a HUF can claim this deduction in their income tax return
  • You can claim this deduction only if the construction of the property has been complete and you have legal possession of the house.
  • This deduction can only be claimed in the year the actual payment is made towards these expenses.
  • Amount must have been paid by the assesse.
  • The claim is entitled only after possession of the property.
    The house should be in the name of theassesse claiming deduction. payment for under construction is not allowed.
  • The deduction is available only for a new residential property & not commercial property
  • The deduction can be claimed by individual and HUF only
  • No deduction in case expenses are paid by any other person.
  • Payment for commercial property is not allowed as deduction. Residential plots also do not qualify for claiming deduction under section 80C.
  • The assessee has to possess the house property for minimum 5 years from the date of purchase or registration whichever is latter.
  • Payment for commercial property is also not eligible for deduction under this section.
  • Joint owner can individually claim deduction of the expenses in the proportion they share the house property up to Rs.1.5 lakhs each under section.
  • No expenses can be claimed if assessee has already occupied the house property either wholly or partially. The house property should be new and had not been in use for the assessee’s own residence.
  • Any other expenses paid for the purpose of transfer of property shall also be eligible for deduction such as service tax paid can also be claimed as deduction under section 80C.

Joint Owners

  • In case the property is jointly purchased, co-owners can claim these expenses in their respective income tax returns based on their share in the property. However, a maximum limit of Rs. 1,50,000 available under section 80C shall apply.

Payment based or due based deduction?

It is a payment based deduction that means deduction in respect of stamp duty and registration charges is only allowed if there is actual payment of these expenses otherwise deduction is not allowed.

If the aforesaid condition is not fulfilled i.e. the house is transferred within 5 years of purchase, the aggregate amount of deduction allowed, shall be deemed to be the income of the assesse of such previous year and he shall be liable to pay tax in the assessment year relevant to such previous year of transfer of house.


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