Whether Stamp Duty and Registration Charges are exempted from Income Tax?
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 can be as high as 8% of the property value and registration charges could roughly be around 1% of the property value. So in total they add up to around 8% to 10% of you house cost.
To give some oxygen to home-buyers, Government included stamp duty and registration charges paid to be deducted from the total income under the section 80C.
Stamp Duty and Registration Charges Deduction Allowed
Stamp Duty and Registration Charges are covered under Section 80C, thus falls in the threshold limit of Rs.1.5 lakhs. Any amount paid over and above the threshold limit is not eligible for deduction that means maximum amount of deduction of Stamp Duty and Registration Charges paid is restricted to Rs.1.5 lakhs.
These expenses can probably exhaust your full threshold limit but do remember that there are other significant avenues covered under the same section, such as LIC, PPF, 5 year tax savings fixed deposit etc.
Conditions for claiming Stamp Duty and Registration Charges deductions u/s 80C, specifically under section 80C(2)(xviii)(d) of the Income Tax Act, 1961 are:
1. Only Individuals and HUF assesses are allowed to claim deductions of Stamp Duty and Registration Charges paid.
2. Deductions can only be claimed in the year of actual payment. Suppose you bought house and paid Stamp Duty and Registration Charges in September 2014, than you can claim deduction for these expenses u/s 80C in the financial year 2014-15 only. Expense for earlier year cannot be claimed.
3. The house should be in the name of the assessee and these expenses of Stamp Duty and Registration Charges must have been paid by the assessee himself/herself. No deduction if the expenses are paid by any other person.
4. For claiming deduction, you must possess the house also i.e. Payment for under-construction is not allowed. In simple words both payment of expenses and possession of the house must be in the same fiscal year for claiming expenses.
5. Deductions can only be claim, if expenses are for new residential house property for self and not for a resold property. Payment for commercial property is also not eligible for deduction under this section.
6. 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.
7. 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.
8. Stamp Duty and Registration Charges paid for residential house qualifies for deduction under section 80C, any expenses for paid residential plot does not qualify for tax deduction under Section 80C.
9. 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.
Words of Wisdom
Recheck that the stamp papers are in your name and do not forget to claim the expense of Stamp Duty and Registration Charges while filing the income tax return of the relevant financial year, as it is a one-time benefit and cannot be claimed later.