Stamp duty deductibility

[pawan]

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Hi… Recently I took a loan from a bank to purchase a flat in Bangalore. I incurred registration and stamp duty of around Rs 70,000. Is this amount deductible under Section 80C or otherwise eligible for some other tax relief?

[John]

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Section 80C & Tax Benefits

Dear Pawan

I have gathered some information that may help you.

Repaying of home loan is eligible for tax deduction under Section 80C… But subject to the fulfilling of the following criteria.

If you take a loan to acquire or construct a house property, the interest you pay is eligible for a tax deduction under Section 24 of the Income Tax Act.
Loan for construction or purchase of a residential home can give you a deduction from the principal repayment of the loan. This is available under Section 80C of the Income Tax Act. All available deductions in this section (and Section 80CCC that cover premiums on life insurance) are subject to a maximum of Rs 1,00,000.

The tax deduction benefit starts from the Financial Year (FY) in which the home is completed. If you have purchased an already constructed residential property, you can start claiming the deduction from the year of purchase.
If the home is still under construction as on the last date of the Financial Year, then no tax benefit can be claimed on the amount of loan repaid during that Financial Year.

Deduction under Section 80C is available for stamp duty and registration charges paid in the Financial Year only if the construction of the property is completed by the Financial Year. Hence, the stamp duty and registration charges paid will not qualify for deduction under Section 80C if the construction is not completed by the Financial Year.

For claiming a deduction under Section 80C, the loan should have only been taken from:

• A bank
• A housing finance company like HDFC
• National Housing Bank
• Life Insurance Corporation of India
• Employer ( but the employer can only be a university, college, a public company, a public sector company, local authority, a corporation/board/body) established by Central/State Act or co-operative society.
• The central government or any state government (this is generally applicable when you are employed by the central/state government).

So, if you have taken a loan from friends/relatives, this repayment will not qualify for a tax deduction. Also, no deduction if the employer is a private limited company.
But, if you took a personal loan from a bank and utilized it towards the purchase/ construction of a residential home, then it would qualify for a tax deduction under Section 80C.