26 NOVEMBER, 2021

You might know that home loans can help you buy the house you always dreamt about. You might also know that you can claim tax benefits on home loan repayment. However, are you aware that this tax benefit can include deduction for stamp duty too? Stamp duty and registration charges are a significant component of the overall cost of the house you purchase. Knowing if you can claim its deduction under Income Tax Act can help you reduce your taxability and save money. Read on to know more.

What is stamp duty, and who needs to pay it?

Stamp duty is an indirect tax that you need to pay when you sell or purchase a property. Stamp duty is levied by the state government and so, its rate differs from state to state. It is charged on the transaction value or circle rate, whichever is higher. Also, there are different stamp duty rates for males and females in some Indian states.

Can you claim deductions on stamp duty?

Yes, you can claim a tax deduction on stamp duty and registration charges paid for the property transfer. You can claim this deduction under section 80C of the Income Tax Act 1961, up to a maximum amount of Rs 1.5 lakhs. If there are co-owners in the property, all of them can claim this deduction on stamp duty payment.

What are the conditions for stamp duty deduction?

Though you can claim stamp duty deduction, there are certain conditions you must fulfill:

  • You must be an individual owner, a co-owner of the property or a member of a Hindu Undivided Family (HUF) that has purchased the property.
  • You must claim the tax benefits in the same financial year in which you have paid the stamp duty charges. You will not be allowed to claim a deduction of stamp duty not yet paid or paid in the previous year. For example, if you pay the stamp duty on 15 April 2021, the tax benefit can only be claimed for the financial year 2021-2022. You can use a home loan tax benefit calculator to know more.
  • If you pay stamp duty for an under-construction property, you can claim deduction only when you get possession of the property.
  • Stamp duty deduction is not available for commercial property, a plot of land, or non-residential property. Also, you can not claim this deduction on the resale property. You must have a 'fresh occupancy' of the property to claim the tax benefit.
  • To claim this tax benefit, you must not sell the property in its lock-in period, which is five years. If you sell the property before five years, this tax benefit is reversed, and the deduction claimed earlier will be payable.

 

Bottom-line

Stamp duty is a mandatory payment that forms a significant part of your overall cost. However, being aware of the stamp duty deduction can help you plan your tax efficiently and save money. So, before you apply for home loan, ensure that you know of all such home loan tax benefits available for you.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.