Stamp Duty and other expense Paid on Property: a Double Treat to Taxpayers

Ek ghar ho sapno ka, Ghar ek mandir, we have seen these sort of connotations used by various builders while promoting their ventures. As an ordinary man buying a property requires huge initial outlay and that will be bifurcated as actual amount paid, stamp duty, registration fee etc.

Assessee always want to get maximum tax benefit, so in this article we will discuss the expenses paid on property, where are the areas they can be claimed and in what manner.

Chapter VIA- Deductions in respect of certain payments states u/s 80c (1) “In computing the total income of assess being an individual or a HUF, there shall be deducted, in accordance with deposited in the previous year, being the aggregate of the sums referred to in subsection (2) as does not exceed one lakh rupees

(2)The sum referred to in sub section (1) shall be any sum paid or deposited in the previous year by assessee-“

(i)-(xvii)…………….

(xviii) for the purposes of purchase or construction of residential house property from the income which is chargeable to tax under the head “ Income from house property, where such payment are made towards or by way of-

(a)-(c)……..

(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee

In simple words, it states that under section 80c you can claim expense relating to purchase of residential house property, which has used as rented property. However, the maximum cap of 1 lakh remain intact. This clause does not apply on self-occupied property.

For example, Mr A has two flats, one is used as his own residence and he bought another flat. Now his income under house property will be assessed for both flats as one under self-occupied and other as rented. Mr. A can claim can claim the stamp duty, registration fee and other expenses paid on rented property u/s 80c (maximum 1 lakh).

Another taxation aspect of property is capital gain. It is a well known by everyone that on sale of assets capital gain arises. Income tax act give indexation of cost of asset sold, if it is sold after 36 months of purchase.

Section 48 deals with the mode of computation of capital gains. It states that “ The income chargeable under the head capital gain shall be computed be deducting the full value of consideration received or accruing as a result of transfer of capital assets of the following amount namely-

i)              Expenditure incurred wholly and exclusively in connection with such transfer

ii)             The cost of acquisition of asset and the cost of improvement thereto”

This definition clearly states that cost of acquisition encompass all cost related to purchase. It includes stamp duty, registration fee etc. so it is part and parcel of cost and hence eligible to be admitted as cost of acquisition.

Summarizing the above discussion, we can say that for expenditure incurred on property being used as other then self-residence can be claimed u/s 80c and while computing capital gains giving ladoo in both hands of taxpayer.