How to claim Stamp Duty Exemption on your Property Purchase?

Real Estate Property is one of the most sort-after investment options in India. You might know that home loans can help you buy the home you have always dreamt about. You might also be aware that you can claim income tax benefits on home loan repayment. However, are you aware that this tax benefit can include deduction for stamp duty and registration charges too? 

Stamp duty (indirect tax) is paid for the registration of properties. This is imposed on the transfer of ownership in real estate. Stamp duty is levied by the state government and so, its rate differs from state to state. 

Stamp duty on property transfer, can go as high as 6% to 10% on your property value. Hence, a stamp duty rebate in income tax can be a huge sigh of relief. 

In this post let us understand – How to claim stamp duty exemption on the purchase of property for Financial Year 2023-24? What is the maximum income tax benefit that a property owner can claim on stamp duty? Is tax deduction on stamp duty available for plot/land purchase? What is the criteria to claim income tax exemption on stamp duty while filing ITR?

Stamp Duty Exemption on Property | FY 2023-24

Income tax benefit on stamp duty is available under section 80c of the Income Tax Act. You can claim a tax deduction of up to Rs 1.50 lakhs on stamp duty and registration charges paid for the property transfer.

Income tax benefit on Stamp duty is available under old tax regime only.

All tax deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc.) are not claimable by those opting for the new tax regime. So, stamp duty exemption is not available under the new tax regime.

Below are the important points that you need to be aware of while claiming tax benefit on Stamp duty;

  • Note that the Rs 1.5 lakh limit would be subject to the condition that you have not already exhausted the Section 80C limit through other tax-saving instruments like EPF, PPF, SCSS, Life Insurance Policy, ELSS Mutual Fund etc.
  • In case of joint ownership of a property, the tax rebate can be availed by the co-owners in proportion to their ownership share and up to Rs. 1.5 lakhs each.
  • If you have purchased a house property in FY 2023-24 and paid for stamp duty and registration fee, you can claim the deduction under Section 80C while filing the Income Tax Return for AY 2024-25.
  • Suppose you have paid Rs 4 lakh as stamp duty in FY 2023-24, while filing ITR for AY 2024-25, you can claim a tax deduction of up to Rs 1.5 lakh only. No deduction can be claimed for the remaining Rs 3.5 lakh.
  • There is no provision to carry forward the stamp duty and claim the remaining balances (unclaimed tax benefit) in the following assessment year(s).
  • Who can claim tax benefit on stamp duty? – 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.
  • The owner must be in legal possession of the property for which the tax rebate is claimed. Kindly note that stamp duty exemption is available only on a new residential property. The tax deductions can be claimed for a new residential house property and not for a resale property.
  • Stamp duty exemption is not available on purchase of Land, plot or commercial property.
  • If you pay stamp duty for an under-construction property, you can claim deduction only when you get possession of that property.
  • If you claim this tax benefit, there is a lock-in period of 5 years. Meaning, you must not sell the property during this 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 shall be deemed to be the income of the assessee (for the FY when such re-sale happens) and accordingly income tax (if any) will be payable.

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(Post first published on : 24-Aug-2023)

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