Is deduction allowed for stamp duty and registration charges?
Firstly, we will tell you what are stamp duty and registration charges?
Stamp Duty is the tax that is paid on the Market Value of the House. This tax is compulsory and is charged by the Government of India. It is however different for different locations.
It is indeed very burdensome to pay Stamp duty and registration charges on a newly acquired/constructed house or housing property. Undoubtedly, it is still a very expensive affair, when to buy a house or housing property.
Besides this, the consumer have to pay the stamp duty and registration charges. It could be anything, approximately 5% to 10% of the value of property bought, the stamp duty and registration charges together.
When one purchases a house or constructs a house property then Stamp Duty & Registration Charges along with other expenses, which are directly related to the transfer, are allowed as a deduction under section 80C of Income tax act of 1961.
But, the deduction is available, if such expenses have been incurred in respect of a new house or housing property. Click here to read about How to deduct TDS through home loan.
As per the provisions laid down in section 80C (2) (xviii) (d) of the Income tax Act, 1961 deduction in respect of stamp duty, registration fee and other expenses for the purpose of transfer of house property is allowed only and only if , they are paid for the purpose of purchase or construction of a residential house, or housing property.
Onwards the financial year of 2015, individuals now can claim tax deductions of up to Rs 1,50,000 under 80C. Since, this deduction is covered under 80c the threshold limit of 150000 comes into picture.
As this limit was set and stressed upon by Finance minister Arun Jaitley in the Union budget of 2014-15, the amount of deduction that one can claim maximum is 100000 for the years previous to 2014-15 financial year.
Let us try and understand some more.
This is a payment based deduction which means that, deduction in respect of stamp duty and registration charges is allowed only if the payment is actually made. Otherwise deduction is not allowed. If for the instance, suppose one wants to claim deduction u/s 80c for these; then they should have paid the stamp duty and registration charges without having any dues.
This deduction is available to the consumer, only after actual possession of the house property. Otherwise it is not allowed.
As mentioned above, payment should be made by the time one is supposed to claim their respective deduction.
For commercial house properties this service or facility is not available. This deduction is available only for the purchase of a new residential house or housing property, and not for the cases of commercial properties.
When can you claim this deduction?
This deduction however, only be claimed in the year in which the actual payment is made towards these expenses. If one buys the property after 30th August 2016 and pays its stamp duty and registration charge, they should have been able to have had claimed these expenses under section 80C only in FY 2016-17. Both an individual and a HUF can claim this deduction in their income tax return.
What about the case of joint owners?
If in the case that one has purchased their property jointly then the co-owners can claim these expenses in their respective income tax returns based upon their share in the property.
However, the maximum limit of Rs. 1,50,000 available under section 80C shall be valid and thus, apply.
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