Stamp Duty and Registration Tax Deduction: Section 123 Rules

Stamp duty and registration charges on a residential house are deductible under the old tax regime, but only within the same ₹1.5 lakh limit that covers EPF, PPF, life insurance and home loan principal (old Section 80C, now Section 123 of the Income-tax Act, 2025). You claim them only in the tax year you pay them, and whatever does not fit is lost. The new regime gives no deduction. Rules are as of October 2026, FY 2026-27.

What the deduction covers

Schedule XV of the new Act lists the payments that qualify under Section 123. For a house, it includes principal repayment of a housing loan and stamp duty, registration fee and other expenses for transferring the house to you, when you buy or construct a residential house.

You do not need a home loan. A buyer paying fully from savings can still claim stamp duty and registration charges.

The ₹1.5 lakh limit is shared

This is where most of the benefit disappears. The ₹1.5 lakh Section 123 limit is one overall cap. If your EPF contribution already uses ₹1 lakh, only ₹50,000 is free for stamp duty. Stamp duty is often several lakh rupees (state rates are commonly in the 5-7% range of property value, plus about 1% registration), so most buyers can claim only a fraction of it.

Our guide to tax saving options under 80C lists everything that competes for the same limit.

Stamp duty usually comes from your own pocket

Under RBI rules, banks generally do not count stamp duty and registration charges as part of the property cost when deciding how much they will lend, except for low-cost homes (property value up to ₹10 lakh). So for most buyers these charges are paid from savings, on top of the down payment. That makes the small tax deduction worth planning for, but it should not drive the purchase. Our guide to the hidden costs of buying a flat lists stamp duty alongside the other one-time charges.

Whether you pay from savings or borrowed money does not affect the deduction. What matters is that you paid it, for a residential house, in that tax year.

Year of payment matters

The deduction belongs to the tax year (1 April to 31 March) in which you pay the stamp duty, not the year of possession or the year the sale deed is handed over.

• Ready flat: stamp duty and possession usually fall in the same year. Principal repayments may start in that year too and compete for the limit.
• Under-construction flat: in many states the agreement is registered early, so stamp duty is paid years before possession. The claim falls in that early year, even though principal and interest claims start only after possession.
• Timing near 31 March: paying stamp duty in late March puts the claim in the current year; paying in April moves it to the next. If this year's limit is already full of EPF and insurance, it rarely helps to shift, because next year's limit fills the same way. Check before you pick a registration date.

Joint purchase

When a house is bought jointly, each co-owner can claim the share of stamp duty and registration they actually paid, within their own ₹1.5 lakh limit. Ownership share alone is not enough; the payment should come from that person's account. If one spouse pays the full amount from their account, only that spouse can claim, and only up to their limit. Our guide to joint home loans covers how co-ownership affects the other home loan benefits.

Worked example: a joint purchase

Kavita and Rohan buy a ready flat for ₹90 lakh in February 2027 (FY 2026-27), owned 50:50. Each pays half the charges from their own bank account. Their home loan EMIs start in April 2027, so no principal is repaid in FY 2026-27. Both use the old regime.

• Stamp duty at 6%: ₹5,40,000
• Registration at 1%: ₹90,000
• Total: ₹6,30,000, so each pays ₹3,15,000

Together they save ₹43,056. Of the ₹6,30,000 paid, only ₹1,68,000 was deductible; the remaining ₹4,62,000 gives no income-tax benefit. Had Rohan paid all of it from his account, the couple could have claimed only his ₹90,000.

If the purchase had been in the new regime, the saving would be nil. Run both regimes for the purchase year in our income tax calculator.

Tax saved at each slab

For a full ₹1.5 lakh claim, assuming the whole amount falls within one slab:

The five-year sale rule

If you sell the house within five years from the end of the tax year in which you got possession, the deductions you claimed under old Section 80C / Section 123 for that house, including stamp duty and principal, are reversed and added to your income in the year of sale. Plan resale timelines with this in mind.

How to claim

1. Keep the stamp duty receipt (or e-stamp certificate), registration fee receipt and the registered sale deed or agreement.
2. If salaried, declare the payment to your employer in Form 124 (which replaced Form 12BB) with the receipts, before the employer's proof deadline.
3. In your return, include it in the Section 123 deduction for the year of payment.
4. Joint buyers should keep separate bank proof of each person's contribution.

For interest and principal limits on the loan itself, see our pillar on home loan tax benefits.

Key takeaways

• Stamp duty and registration on a residential house are deductible within the ₹1.5 lakh Section 123 (old 80C) limit, under the old regime only.
• Claim it only in the year you pay it; the unused amount is lost.
• No home loan is needed, but plots and commercial property do not qualify.
• Joint buyers each claim what they actually paid, within their own limit.
• In the example, a couple paying ₹6.3 lakh in charges could deduct ₹1.68 lakh and save ₹43,056.
• Selling within five years of possession reverses the claim.