What is Stamp Duty?
Stamp Duty is a kind of Tax levied by the government on the legal recognition of certain documents. This Stamp Duty should be paid in full amount on stipulated time. The Stamp Duty is payable/collected under Section 3 of Indian Stamp Act, 1899. Stamp duty is also a kind of property tax on which a home buyer needs to pay this on the sale of the agreement. The property includes independent houses, freehold or leasehold from land, flats to commercial units. The Stamp Duty charges vary for different states. The Rate depends on the market value and other several factors.
Example: The Stam Duty charges for Rajasthan is at 5% whereas the rate in the state of Tamil Nadu is 7%.
What is Registration and Registration Charges?
After paying the Stamp Duty, the documents needs to be registered under the Registration Act, 1908 within 4 months from the date of execution. The Registration charges are over and above the stamp duty. The Registration charges are levied at the rate of 1% of Total Property value/ market value/ agreement value whichever is higher.
Section 80c – Deduction of Stamp Duty & Registration Charges
Life insurance premiums, contribution to Provident Fund, deferred annuity, subscription to certain equity shares or debentures, etc. are allowed as a deduction under Section 80C. This Section provides deductions in respect of specified qualifying amounts paid or deposited by the assessee in the previous year. The Section 80C is applicable from the assessment year 2006-2007.
- The deduction is available under Section 80C from gross total income.
- Under Section 80C deduction is available only to an individual or HUF.
- The deduction is the basis of specified qualifying investments/deposits/contributions/payments made by the taxpayer during the previous year.
- The maximum amount deductible under Section 80 is Rs. 1, 50,000. It was Rs. 1,00,000 up to the assessment year 2014-2015.
- The gross qualifying amount would be allowed as deduction.
Calculation of Deduction under Section 80C
The deduction under section 80c is computed as per the following steps:
Step1: Gross qualifying amount.
Step2: Amount of deduction.
Let us take an example for clear understanding of this whether the deductions are available under Section 80C or not.
Mr Kiran bought an old house in Bhartpur and paid the stamp duty and registration fee of Rs. 75000/- on 10 Apr 2013. It’s 2 story house. However he is currently residing in the different city named Panchkula and staying on rent and showing HRA under 80C. Kiran paid the stamp duty and registration fee through cash and not taken any sort of loan for purchasing the house. Now he is asking whether he can show stamp duty and registration charges of Rs. 75000/- under section 80C in this current financial year 2013-2014.
As per experts opinion, deduction of Stamp Duty and Registration charges for the purpose of transfer of House Property is allowable but shall not include any payment towards or by way of:
- The admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member.
- The cost of any addition or alteration to renovation or repair of the house property which is carried out after the issue of the completion certificate.
- Any expenditure in respect of which deduction is allowable under the provisions of section 24.
Above mentioned para is from Income Tax Act itself. As it is mention that no deduction is allowable after issuing of completion certificate. So as per one expert in the case of Mr Kiran deduction is not allowable under Section 80C.
As per another expert, Mr Kiran can claim deduction under Section 80C as there is a provision written over there that any amount paid for the stamp duty and registration charges at the time of acquiring ownership is allowed as a deduction in the year of purchase of the house.
Finally as per your CA expert, you can claim your deduction as it is not mentioned anywhere in the Act that, deduction on an old house is not allowable. So you can take it another way too. It’s all about how you understand the situation or problem. So better follow the guidelines suggested by your CA expert.