Stamp Duty for Property Purchase: Exemptions, Deductions, and Tax Benefits

In real estate transactions, the buyer is liable to pay the stamp duty when they purchase a property. Stamp duty is a critical component that can increase the total property ownership cost. Knowing the various exemptions available for stamp duty can help you save money. While there is no direct tax exemption on stamp duty, tax benefits are available for those who pay stamp duty during property purchase. 

Stamp duty exemption waives off or reduces these stamp duty charges; this way, a property deal becomes more affordable for the exempted individual. However, the applicable stamp duty and available exemptions (in the form of reduction of stamp duty charges) vary from one state to another. 

Stamp duty exemption is available for some cases, as stated below:

• Section 40 of WODA:  Any award or agreement made under the Works of Defence Act is exempted from stamp duty. Moreover, no fees need to be paid to obtain photocopies of such documents.  

• Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013: Section 96 exempts awards or agreements from income tax and stamp duty.

• Delhi Apartment Ownership Act, 1986: Under this Act, the Central Government is empowered to waive or rebate stamp duties regarding documents relating to apartments in certain circumstances.

   

These provisions thus reflect the government's concern to make the legal process smoother and alleviate financial burdens in certain matters.

Stamp duty exemptions are available for eligible property transactions. Some states, like Maharashtra, offer concessions for women owners by reducing the applicable stamp duty charges. Additionally, tax benefits are available for eligible taxpayers when they pay stamp duty. These are important because of the following reasons:

• Reduces Financial Stress: Since a significant portion of house property expenses accrue from stamp duty and charges for registration, exempted stamp duty (for applicable cases) reduces ownership costs for the homebuyer.

• Supports Homeownership: The government encourages individuals wishing to own a house by providing tax savings. Homeownership increases house sales, ultimately helping the property market grow and stabilise the economy further.

• Income Tax Savings under Section 80C: A resident individual (or HUF) is entitled to get deductions for a maximum amount of ₹1.5 Lakh stamp duty and registration charges on a new home or flat purchased, which will get deducted only during the year the payment has been made. Also, when deductions are claimed, the new homeowner cannot sell the property during the lock-in period (generally 5, but varies with state). If you choose to sell the house again before the lock-in period, the current ITR will be revised, and the claimed deduction will be taxed. 

• Benefit through Joint Ownership: For jointly held properties, any owner can seek deductions according to their share, with ₹1.5 Lakh being capped per person for this purpose; this would thereby help families get the maximum cumulative tax benefits.

Stamp duty deductions can be claimed while filing an income tax return. However, knowing when these claims can be made is crucial. During the purchase of a house, stamp duty, registration charges, and other eligible expenses can be claimed as tax deductions in the year of actual payments. 

For example, if you purchase a property and pay stamp duty on 19th January 2025, you can claim the deductions in the financial year 2024-25 (assessment year 2025-26). Both individuals and Hindu Undivided Families (HUF) are eligible to claim this deduction. 

It is important to note that stamp duty tax benefit while filing income tax returns (ITR) can be claimed only in the same year and cannot be carried forward for the following year. Also, it is applicable only if the taxpayer has opted for the old tax regime while filing the ITR. This deduction is not available for those under the new tax regime (introduced in the Union Budget 2020).

Stamp duty tax benefits can be claimed when filing the income tax return. The following steps can help:

1. Collect Documents: To claim this deduction, you need to upload documents related to proof of property purchase, stamp duty payment receipts, and other exemption certificates applicable in your case. For successful claims, accurate documentation is necessary.

2. Fill in Tax Return Forms: Attach all the necessary documents with the tax return forms. Ensure the accuracy of calculating the claim amount based on eligibility.

3. Submit a claim: Submit the income tax return and file a claim. 

4. Track Claims: You can use the online income tax portal to track claims and ensure the exemption is processed.

Different factors, such as buyer's profile, property type, and government schemes, determine whether or not you are eligible for stamp duty exemption in the form of a concession. While complete exemption depends on the applicable stamp duty laws, some of the common scenarios in which you can become eligible for discounted stamp duty rates are:

• First-Time Homebuyers: In many states like Karnataka, first-time homebuyers are offered reduced stamp duty charges. It can support those trying to buy a home to live in.

• Women Property Buyers: To increase the percentage of women owning properties, states like Maharashtra offer benefits to women owners. It encourages the empowerment of women and positions the female gender highly within the family set-up.

• Government Schemes: Under government schemes like an economic assistance program or an affordable housing project, stamp duty exemptions may be available if you qualify. The exemption limits and waivers vary with each government scheme.

• Senior Citizens: In some states, such as Maharashtra, if senior citizens over 60 years of age buy properties in their name, they can get stamp duty exemptions in the form of concessions.

• Economically Weaker Sections (EWS): The government supports uplifting EWS families and offers stamp duty exemptions. If you fall into this category, you can get such exemptions.

The following steps are necessary to apply for stamp duty exemption:

1. Check Eligibility: Ensure you tick all the eligibility boxes for the stamp duty exemption process, before moving ahead for application. 

2. Gather Documents: You will need property details, proof of income, eligibility documents, and other application forms. You might also need ID proof. 

3. Submit Application: You may submit the application form at the local sub-registrar's office or apply through the online portal, if available. Fill in all the details carefully to avoid rejection.

4. Receive Exemption Certificate: After the application for exemption is approved, you may receive a stamp duty exemption certificate required to update the property documents. If you are eligible for a lower stamp duty, you can pay the lower fee and get the property documents. 

5. Complete Property Registration: The property documentation registration will be completed after paying the required stamp duty.

If more than one person purchases the property together as joint owners, the co-owners can all claim these expenses in their individual tax returns based on their share in paying stamp duty. However, the maximum cap in this case is ₹1.5 Lakh under Section 80C deductions for all joint owners. 

As mentioned earlier, the Section 80C deductions for stamp duty are available for those who have opted for the old tax regime. Moreover, the following conditions apply:

• Only for Primary Residence: You can claim stamp duty deductions only for first-time home purchases, which are the purchases of a primary residence. If you already have a property under your name or purchase commercial properties, this does not apply. 

• Same Financial Year: You can claim deductions and exemptions for stamp duty paid in the current financial year. You must submit the necessary receipts and documents. 

• Overall Limit: The total deductions allowed under Section 80C is ₹1.5 Lakh, including stamp duty deductions. If you claim deductions under Section 80C for other eligible investments and have reached this maximum limit, you cannot claim additional deductions for stamp duty even though you are eligible.