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Ask Mint Money

Stamp duty can be claimed as deduction under section 80C

I bought a flat in April and it is still under construction. I took a loan of Rs29.75 lakh and started paying the interest through pre-equated monthly instalments (EMIs) immediately. Till March 2011, I would have repaid around Rs1 lakh. Will this be tax-exempt this year?


As per the provisions of section 24 of the Income-tax Act, interest attributable to the period before the completion of construction is aggregated and allowed in five successive fiscal years, starting from the year in which the acquisition/construction has been completed.

Since the flat you have bought is still under under construction, the amount of interest you pay to the bank cannot be claimed as deduction in FY11. It will, however, be allowed for deduction in five equal instalments starting from the year in which the flat is completed.

If any part of the EMI goes into paying the principal amount, the said amount can be claimed as a deduction under section 80C within the overall limit of Rs1 lakh.

I took a home loan for a resale flat and got the possession in the current fiscal year. My wife and I are salaried individuals and we jointly own the flat. I paid the registration and stamp duty. Later the bank reimbursed 80% towards home loan. Can I claim exemption for the stamp duty and registration paid? If so, under which section and what is the maximum limit? My wife’s salary is not taxable.

-Rajkumar Nuhal

Stamp duty and registration charges paid for purchase or construction of a residential house property—the income from which is taxable under the head “income from house property"—can be claimed as a deduction from the total income under section 80C.

The amount of deduction on payment of stamp duty together with payments for other deductible instruments such as provident fund and life insurance cannot exceed Rs1 lakh .

Can I buy a commercial plot from the sale proceeds of a residential plot to avoid tax liability. Would I have to pay tax on the long-term capital gain made through sale of such land?


The provisions of the Income-tax Act do not provide for exemption from the taxability of capital gains if the sale proceeds of a residential plot are invested in a commercial plot. You will be liable to pay tax on the capital gain arising on the sale of such a residential plot.

It would be a long-term capital gain in case the plot has been held by you for at least three years. In such a case, the amount of capital gain would be computed after giving due relief on the basis of cost inflation index applicable in the fiscal year in which the sale takes place.

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