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DYK: Stamp duty and registration fee qualifies for sec 80C

You are eligible only if the construction of the property is completed and you have possession

Apart from basic cost, there are numerous other expenses that you have to pay while buying a house. Among the significant expenses are stamp duty and registration fee, which have to be paid to get the property transferred in the buyer’s name. Giving some respite to homebuyers, government allows them to claim payment of stamp duty and registration fee as deduction from their income.

What is stamp duty and registration fee?

To register a property, you need to pay a certain percentage of the property value as stamp duty. The duty varies across states. Stamp duty is calculated as a percentage of the agreed value of the property or value derived on the basis of circle rate (minimum price of property as per the government), whichever is greater. In addition to stamp duty, typically 1% of the value of the property is charged as registration fee to register the property’s document (sale deed). In some states, if a property is bought in the name of a woman, a lower stamp duty is levied than if the buyer is a man. For instance, in New Delhi, a woman has to pay 4% stamp duty, compared with 6% for a man.

However, in case of joint ownership, where the property is bought jointly in the name of a man and a woman, buyers have to pay stamp duty of 5% in Delhi. In some states, the stamp duty depends on the region in which the sale deed is executed. For instance, in Haryana, a man is required to pay 8% stamp duty in urban areas and 6% in rural areas, while a woman has to pay 6% and 4%, respectively.

Deduction allowed

While computing taxable income of an assessee, being an individual or a Hindu Undivided Family, there are few deductions which are allowed. Payment of stamp duty and registration fee qualifies for deduction under section 80C of the Income-tax Act, 1961, within the overall limit of 1.5 lakh.

There are other avenues as well that qualify for deduction under the same section, such as life insurance premium, provident fund contribution, 5-year term deposit, and so on. If you bought your property jointly, i.e. along with your spouse, both of you can claim deduction up to 1.5 lakh separately.

Do remember, however, that you are eligible to claim deduction only if the construction of the property is completed and you have possession of the house.

What should you do?

Make sure you buy the stamp papers in your name. The claim should be made while filing the return of the relevant year, i.e. the year in which the stamp duty and registration fee are paid.

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