FAQs On Tax Benefits For Homebuyers On Stamp Duty and Registration Charges

Stamp duty and registration charges significantly increase the cost of buying a property—In India, a homebuyer has to pay stamp duty between 4-10 per cent and registration charge at one per cent of the property value. More importantly, buyers invariably have to arrange this extra money on their own as banks typically offer only 80 per cent of the property value as home loan, leaving the borrower on their own to arrange money for all additional expenses incurred during the purchase process. Do note here that despite the many directives issued by RBI to factor in stamp duty and registration charge while calculating the overall cost of property, little change could be seen in the approach of financial institutions in India.

However, some relief has been offered to homebuyers in the form of tax deduction on stamp duty, registration charge and other such expenses incurred during property purchase under the Indian tax laws. In this article, we would discuss at length how a homebuyer can claim tax deduction against stamp duty and registration charge on property purchase.

Under what sections can deductions be claimed on stamp duty and registration charge paid on property purchase?

Deduction on stamp duty and registration charge on property purchase could be claimed under Section 80C of the Income Tax Act, 1961. Do note here that the overall deduction limit under Section 80C ─ which offers rebate against a wide range of investments, including PF, PPF, life insurance, home loan principal etc. ─ is Rs 1.50 lakh in a year. So, under Section 80C, a homebuyer not only claims rebate on his home loan principal but also on stamp duty, registration charge and other additional expenses. However, the limit stands at Rs 1.50 lakh in a year only.

Who can claim these benefits?

Under the law, individuals as well as Hindu Undivided Families (HUFs) can claim the rebate against stamp duty and registration charge they pay on property purchase under Section 80C.

What are the conditions to claim tax benefit on property stamp duty and registration charge under Section 80C?

A buyer has to fulfill certain conditions to claim tax deduction on property stamp duty and registration charge under Section 80C. These include:  

Applicable only on individuals, HUFs: He has to be either an individual or part of an HUF

Applicable on own funds: He should pay the stamp duty and registration charge from his own pocket. If the money is borrowed from someone, the tax deduction can’t be claimed.

Applicable only one time: More importantly, this is only a one-time benefit. The taxpayer can claim this deduction only in the year in which he has actually made the payment. The rebate can’t be claimed before or after that year.

Applicable only on house purchase, construction: The deduction is meant only for purchase and construction of residential house property. This means you can’t claim the deduction for stamp duty you paid on plot or land purchase.

Applicable on joint owners: For a co-owned property, both owners can claim deductions while filing their respective Income Tax (IT) returns. For both of them, this could be part of the overall limit of Rs 1.50-lakh limit under Section 80C.  

Applicable only on new property: Another interpretation is that deduction on stamp duty and registration charge can only be claimed on new property and not on a resale property. This is because the law states that if costs have been incurred in making changes in the property after it receiving completion certificate (CC), it wouldn’t be considered to offer rebate. Similarly, no deduction can be allowed if the taxpayer or anyone on his behalf has already occupied the property.

According to Section 80C the deduction will be allowed only if the purchase doesn’t include any payment towards or by way of the cost of any addition or alteration or renovation or repair of the property which is carried out after the issue of the CC in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out”.

Answering some FAQs on tax rebate on stamp duty and registration charge

Can the rebate be claimed on stamp duty paid if money is borrowed to build a new house?

The rebate can be claimed on purchase as well as construction of the property.

Can the rebate be claimed on stamp duty paid if money is borrowed to buy a plot?

The deduction is available only for purchase and construction of residential property.  So, it’s not available for plot purchase.

Can joint owners claim benefits?

Yes, both the owners can claim deductions of Rs 1.50 lakh each under Section 80C for one time in which they paid the stamp duty and registration charges.

What does Section 80C mean by other services when offering tax rebate on stamp duty and registration charge?

Other services cover legal expenses incurred by the buyer during the purchase.

Can deductions be claimed if I plan to construct a house on a plot I have bought?

For the loan taken for the construction, deduction can be claimed on stamp duty under Section 80C. The same isn’t true in case the money has been borrowed for plot purchase.