Over the past several years, the trend of investing in property has gained much popularity. Not only does such an investment assure of better returns on the invested amount, but the investors also benefit from the tax exemptions offered by the government on such transactions. Given that stamp duty and registration charges form a major chuck of the expenses incurred by the buyers to get the property transferred in their name, they naturally expect to get some tax relief on the same. However, before getting the answer to this query, the buyers needs to understand what stamp duty is.
What is stamp duty?
Put in the simplest terms, stamp duty is the tax that the buyers pay to the government upon buying a property. The tax, which is levied by the government of India, is mandatory for every purchase of property carried out in any part of the country. The tax amount is different for different locations and generally based on the market value of the property being purchased. This essentially means that areas where the prices of property are quite high tend to have a higher amount of property tax as compared to the areas where the property prices are somewhat lower.
Tax exemptions on stamp duty
The good news is that the stamp duty and registration charges can be claimed for tax deduction under section 80C of the Income Tax Act, 1961. At present the maximum amount of deduction under section 80C is Rs. 1.5 lakh. In case the value of the stamp duty is over and above this limit, the buyers will not be eligible for any exemption on the amount that is more than the maximum threshold of 1.5 lakh.
Conditions for tax exemption
Buyers seeking tax deductions for stamp duty and registration charges need to fulfill the following conditions to claim the benefits.
- The exemptions are provided both to individual buyers and buyers who fall under the category of Hindu Undivided Family (HUF).
- The claims can be made only in the year when the actual payment for the property is done.
- The exemption can be claimed by the buyers only when they make the stamp duty payment on their own. In case of payments made by other individuals or parties, the deduction claim will be considered invalid.
- Only the claims made for fully constructed properties will be considered valid, which means that the claimants should have paid the stamp duty for the property and acquired its possession within the same financial year.
- The claims are considered valid only for the stamp duty paid while buying residential property for self by the buyers. Properties that are purchased under resale, paid residential plots or even properties having commercial value are not eligible for any such deductions.
- In case of properties being held under joint possession, individual owners can claim deductions for their share up to a maximum of 1.5 lakh.
Keeping the above factors in mind while buying residential property can help the buyers save a considerable amount of money and in property transactions.