Tax Benefits on Stamp Duty & Registration Charges of a Property

Stamp Duty and Registration Charges are the expenses which have to be paid while buying a house and get it transferred in your name. It is the tax that is paid on the market value of the house.

The Stamp duty and registration charge is mandatory and is levied by the Government of India. The rates differ from one region to another. This payment entitles the legal right to the property. The highest rate is in Mumbai as the prices of the property are elevated.

Government has provided relief in respect of payment of this duty and charge. The Stamp duty and registration charges paid can be claimed as deduction from the total income under section 80C of income tax act, 1961. The deduction can be claimed by individual and HUF only.

As per provisions of section 80C (2) (xviii) (d) of income tax act, 1961, deduction in respect of stamp duty and registration fee and other expenses is allowed if it is paid for purpose of purchase or construction of a residential house.

Maximum amount of deduction

The threshold limit of deduction under 80C is Rs.1.5 lakhs and Stamp duty and registration charges are also covered under this limit. Amount over and above this limit cannot be claimed as deduction which means maximum deduction of Stamp duty and registration charges is Rs. 1.5 lakhs. These expenses can exhaust full threshold limit but always remember there are also other significant deductions under section 80C such as LIC, PPF, Education fees of students etc.

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 anyone wants to claim deduction u/s 80C for these, then these expenses must be paid without having any dues. Example: Mr.A purchased a house property and paid Rs.2,00,000 as Stamp Duty and Registration Charges in November 2015, assesse can claim deduction Rs.1,50,000 under section 80C in financial year 2018-19. Expenses for earlier years cannot be claimed.

So assesse should not forget to claim stamp duty and registration expense as deduction while filing ITR of the relevant financial year as it is one-time benefit.

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

  • Only Individuals and HUF assesses are allowed to claim deductions of Stamp Duty and Registration Charges.
  • Deductions can only be claimed in the year of actual payment.
  • The house should be in the name of the assessee and these expenses must be paid by assessee himself/herself. No deduction in case expenses is paid by any other person.
  • To claim the deduction, one must possess the house which means payment for under construction is not allowed.
  • The deduction is only allowed if expenses are paid for residential property for self not for reselling house i.e. payment for commercial property is not allowed as a deduction. Residential plots also do not qualify for claiming deduction under section 80C.
  • The assessee has to possess the house property for a minimum of 5 years from the date of purchase or registration whichever is the latter.

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 assessee of the such previous year and he shall be liable to pay tax in the assessment year relevant to such previous year of transfer of the house.

Example: Mr A purchased a house in August 2022 and paid Stamp duty & Registration Charges of Rs. 1,00,000. He is allowed a deduction in AY 2023-24.

  • Joint owners can also claim deduction individually in the proportion they share house property up to Rs. 1.5 lakh each.
  • The house property should be new and had not been in use for the assessee’s residence earlier.

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