Stamp Duty Tax Exemption: A Detailed Guide
- Bhavika Rajput
- 3 days ago
- 6 min read
Purchasing a property is a significant life event. However, did you know that stamp duty tax exemptions can save homeowners thousands in taxes? The excitement of homeownership often entails intricate financial planning for many first-time homeowners. Stamp duty tax is still a substantial but occasionally disregarded expense, even if the down payment and EMIs are the most important concerns. You can lower your tax liability and save money by finding out if you qualify for the deduction under the Income Tax Act. According to Section 80C, stamp duty and registration fees paid for the acquisition of an under-construction property are deductible up to Rs. 1.5 lakh. The total amount that can be deducted under Section 80C includes this deduction.
Table of Contents
What is Stamp Duty Tax?
Stamp duty is defined as an indirect tax, which is levied by the Union Government of India and state governments on a number of particular legal and financial transactions. Stamp duty must be paid for a document to be deemed legally valid and acceptable in court. In addition to its main function of document validation, stamp duty is a significant source of funding for governments. The Indian Stamp Act of 1899 governs the legislation regarding the imposition of stamp duty. Furthermore, every state in the Union of India has a stamp legislation that regulates the imposition of stamp duty within the state.
Conditions For Stamp Duty Exemption
Even so, there are requirements you must meet to be eligible for a stamp duty exemption:
You must be the property's sole owner, a co-owner, or a member of a Hindu Undivided Family (HUF) that bought the property.
The tax benefits must be claimed during the same fiscal year that the stamp duty charges were paid. You cannot deduct stamp duty that has been paid in the past year or that has not yet been paid. For instance, you can only receive the tax benefit for the fiscal year 2021–2022 if you pay the stamp fee by April 15, 2021. To find out more, you can use a home loan tax advantage calculator.
You can only claim a deduction for stamp duty paid on an under-construction property once you take ownership of it.
Commercial property, a piece of land, and non-residential property are not eligible for the stamp duty deduction. Furthermore, this discount does not apply to resale property. The property must be in "fresh occupancy" for you to be eligible for the tax credit.
You must not sell the property during the five-year lock-in term to be eligible for this tax benefit. This tax benefit is reversed, and the previously claimed deduction is due if you sell the home before the five-year mark.
When Can You Claim a Deduction?
Only the year in which the actual payment for these expenses is made may be used to claim this deduction. For example, you can only claim these expenses as a section 80C deduction in FY 2024–2025 if you buy the property on August 30, 2024, and pay the registration fee and stamp duty.
Only newly constructed residential properties are eligible for this section's deduction. Commercial properties are excluded.
This deduction is available on the income tax return for both individuals and HUFs.
You can only claim this deduction if you chose to use the previous tax system. You cannot claim this deduction if you have chosen a different tax regime.
What Expenses Cannot Be Claimed as Deductions?
Admission fees, share prices, and the first deposit paid by a company's shareholder or member of a cooperative society to become a shareholder or member are all included.
The price of a renovation, addition, or change made after obtaining a certificate of completion, or after the buyer has moved in or rented out the home.
Only newly constructed residential properties are eligible for this section's deduction; neither commercial nor resale properties are.
Additionally, residential land or plots are not eligible to claim a deduction under section 80C.
Joint Owners
The co-owners may deduct these costs from their individual income tax returns according to their ownership stake in the property if you bought it jointly.
Section 80C allows each co-owner to use up their unlimited limit of Rs. 1.5 lakhs.
Where Can Stamp Duty Tax Exemption be Claimed on the ITR?
Stamp duty and registration expenses paid at the time of real estate purchase are deductible under Schedule VI-A, Section 80C.
The information is in Schedule PART-C, "Deductions and Taxable Total Income," on Forms ITR-1 and 4.
The income tax utility has drop-down options this year, and to claim any deduction, the document reference number must be entered.
Conclusion
Homebuyers who invest in under-construction residences might benefit greatly from tax breaks on stamp duty and registration fees. You can maximise savings and successfully lower your tax bill by claiming tax deductions under Section 80C. However, these costs are not deductible from taxes under Section 80C in case of completely constructed properties.
Frequently Asked Questions
Can stamp duty tax exemption and Section 80C deduction be claimed simultaneously?
Yes, assuming all qualifying requirements are satisfied, you can claim the Section 80C deduction for homebuyers on the amount paid towards stamp duty and registration expenses, as well as the stamp duty tax exemption (if applied in your state) as a first-time homebuyer.
Is the exemption available on a second home?
No, exemption is available to first-time homebuyers buying their first residential property in India.
What if my spouse is the co-owner?
Both you and your spouse may claim a proportionate tax exemption on stamp duty and registration if you are co-owners and first-time homeowners, if you are both eligible and adhere to tax regulations.
Can I claim tax benefits for a jointly-owned property by me and a non-working spouse?
Yes, if you paid from your income, you are eligible to claim the Section 80C deduction on your part of the stamp duty and registration tax exemption.
Do I need to live in the home immediately to claim tax benefits?
No, you can claim Section 80C advantages for stamp duty and registration fees without having to move in right away. However, you have five years from the date of possession to sell the property. The claimed reductions could be overturned and added back to your taxable income in the year of sale if you sold earlier.
Are tax benefits transferable on selling of property later?
No, Section 80C tax benefits cannot be transferred. Any claimed tax benefits will be reversed and taxed as income in the year of sale if the property is sold within five years of possession. The new buyer may only get benefits based on their eligibility and payment. Therefore, they are also unable to claim the previous owner's deductions.
What happens if the registration is delayed? Can I still claim deductions?
You may not be eligible for the Section 80C deduction for stamp duty and registration fees if you postpone registering. It is because the deduction can be claimed in the same fiscal year when the payment is made.
I have opted for the new tax regime. Can I claim a deduction on stamp duty paid?
No, you may only claim this deduction if you decide to use the previous tax system. You cannot claim any deductions on the new tax regime that you have chosen.
In which year can I claim a deduction on registration charges and stamp duty on property?
You are eligible to get a deduction in the year that you paid the amount, i.e., the year that you registered your property and made the payment.
Can I claim tax benefits on stamp duty and registration charges for a ready-to-move-in property?
No, under Section 80C, tax benefits on stamp duty and registration fees are only applicable to properties that are still under construction.
What is the tax deduction threshold for stamp duty and registration charges under Section 80C?
Section 80C permits a maximum tax deduction of Rs. 1.5 lakh when paired with other qualified investments.
Is TDS applicable to stamp duty and registration charges?
Yes, the buyer must deduct TDS from his payment to the seller if he purchases an immovable property for more than Rs 50 lakhs.
Does Section 80C deduction apply to stamp duty and registration charges for a commercial property?
The only properties that are subject to stamp duty are residential properties.
Can multiple deductions u/s 80C be availed for stamp duty and registration of various house properties?
Yes, you can also receive a deduction of up to Rs. 1.5 lakhs for multiple housing properties.
Who is eligible to claim the deduction?
Eligible parties include Hindu Undivided Families (HUFs) and individuals. This benefit is only available if you choose to use the previous tax system.
Is there a lock-in period for this deduction?
Yes. The property cannot be sold within five years of acquisition. The previously claimed deduction will be reversed and added back to your income in the year of sale if you do this.
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