Calculating tax liability

Q.A is a retired bank officer and had raised house loan of Rs 2.4 lakh for purchase of house and again of Rs 4.6 lakh for constructing first floor and repair of house during his service and has repaid fully by paying Rs 120500 during the financial year 2016-17.

• A has purchased one more house measuring about 170 sq.yd jointly with B ( married & professional daughter) in the 50:50 ratio in 2016-17. B's name is in the first place in the title deed. B has professional income of Rs 5,20,000 and is paying income tax accordingly. The house is being used by  B and A is also using the same for parking his vehicles.
• A is receiving pension from bank (approx. Rs 4,25,000) and interest income of approx. Rs 1,87,000 and is also saving of Rs 1,50,000 u/s 80C.
• A & B each will be repaying house loan instalments and interest of Rs 1,70,000 in this year individually from their personal savings bank accounts/cash. Bank will charge interest on new house of Rs 11,50,000 approximately in 2016-17.
• C,  the wife of A is a housewife having interest income of Rs 2,75,000 on deposits from banks. C has sold some equity shares through broker @ premium of Rs 5 of a registered Ltd company issued to her in September 991 for Rs 42,961/50.

What will be the income tax liability of A & C during 2016-17? Also what will be the method to calculate notional rent of A’s first house as  above? — Raj Kumar

A.Your queries are replied hereunder:

• IT liability on the basis of the facts given in query in respect of A would be Rs 21,836 and in respect of C would be Rs 7,000.  Tax in case of C has been computed on the presumption that interest earned by her is in respect of FDs and the shares sold by her were shares on which Securities Transaction Tax had been paid. The amount of capital gain has been considered as exempt from the levy of income-tax. This presumption has been made as these details were not available in the query.
• Presuming that the house purchased earlier is self-occupied house, and therefore, will be having nil annual letting value since you repaid the loan amount in full in respect of the said house. The amount of interest  paid for the said house can be deducted from the total income of Rs 4,62,000 (after taking into account savings of Rs 1,50,000 under Section 80C.  The figure of such interest not being available, the aforesaid amount of allowable interest has not been considered  while computing tax.
• One-half of annual letting value in respect of the second house purchased in joint name will have to be determind on notional basis. One half thereof will be included in your income.  The other half would be included  in the total income of B.  According to the provisions of Section 23 of the Act, annual value of a property shall be deemed to be a sum for which property might reasonably accepted to let from year to year or where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a) above so received or receivable.  This Section also provides for the deduction of the house tax actually paid during this year from such annual value. The annual value so determined shall have to be allocated equally between the two owners. The assessable value on which house tax is chargeable can be one of the factors for dertermining the annual value.
• Particulars about the assessable value have not been given. The relevant part of the annual value includible in your income has also not been taken into account while computing the total income.

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Is the interest received from builder taxable?

Q.I have received Rs 11,10,000 along with an interest of Rs 4,90,535 through consumer court as the builder had failed to deliver the flat in time. I have received interest on delayed payment through court Rs 66,000 decree amount DDO deducted 10 per cent income-tax. My advocate says that the interest received by decree amount is not taxable. Kindly clarify if the interest is taxable or not? In case it is taxavble then is there any way in which the tax could be saved? — Om Parkash

A.The amount interest of Rs 4,90,535 for  failure to deliver the flat on time should be taxable. The amount so received would be added to your taxable total income which would be taxable at the applicable slab rates. The avenues available for saving tax are contained in Section 80C of the Act which include deposit in Public Provident Fund account, a deposit under senior citizen scheme, term deposit with a bank for a minimum period of five years, payment of insurance premium  and the like.  The maximum permissible deduction under the aforesaid Section is Rs 1,50,000.

Interest on delayed payment received through court on decreed amount should also be taxable.

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Can exemption under Section 54 availed by all co-owners?

Q.I am co-owner in a residential property that is owned by three people - me and my two brothers. It is in the name of my mother who had passed away in 2000. Now we have decided to sell this property We are planning to have saperate houses for each from the sale proceeds. I want know how can we save tax? Can Section 54 exemption be availed by all three of us? — Kaushal Goyal

A.Each of the co-owners can avail exemption under Section 54 of the Act.  The amount of capital gain arising on the sale of the house owned by three of you woluld be allocated to each one of the co-owners. Each one of you can, therefore, avail the benefit under Section 54 of the Act as stated above. The requirement for aviling the aforesaid benefit is that the amount of capital gain should be utilised for purchase of a residential house one year before or two years after the date of sale of a residential house or a residential house should be constructed within three years after the date of sale of the old house. The amount of capital gain which remains untilised up to the date of filing tax return for the year in which the capital gain arose should be deposited under the capital gain scheme account before the due date of filing the income-tax return. The amount so deposited can be utilised for the purchase or construction of a residential house within the prescribed time.

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Process for transfer of plot

Q.My father has a residential plot in Ansal builder society in Haryana. This plot can be transferred to anyone by paying transfer fee to the builder as we have not yet executed conveyance deed. We are two brothers and my father wants to transfer this plot to me with mutual consent of my brother. How should we proceed in this regard? Our CA has suggested to make a agreement on Rs stamp paper from my father's side stating that he is transferring plot to me and get it notary attested in Tehsil - this agreement will serve the purpose of IT department and also on this basis we can get the plot transferred in builder's records by paying transfer fee. After transfer we can get the conveyance deed in my name or keep it still transferrable in case I sell it out in future. What is your advise in this case? — Dinesh Narang

A.The suggestion given by your Chartered Account is correct except that text on the stamp paper should specify that the amounts so far paid to builder are being gifted by your father to you, and therefore, the booking of the plot subject to the consent of the builder be made in your name. Your father should approach the builder with a request to transfer the plot in your name and thereafter get the conveyance deed executed in your name. The above request letter along with the gift deed executed on Rs 100 stamp paper can be produced to the tax authorities as when any enquiry  in this regard is made.

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Is Estate Office’s objection valid?

Q.My mother owned a freehold immovable property at Chandigarh. TAfter her death the property was transferred in my and my sister's name (50 per cent share each) as per the registered Will of our mother. The estate office issued a letter in this regard after the completion of all formalities, including getting no objection letters from all the children of our mother and publication of advertisement in the newspapers.

Last year, my sister expressed her willingness to transfer her 50 per cent share in my name. Accordingly, a family deed was prepared by the advocate and was duly registered in the Registrar's office at Chandigarh. Subsequently, an application to transfer the property in my name was submitted in the Estate Office at Chandigarh. All related documents, including the registered family deed were enclosed. The Estate Office, however, rejected the application without assigning any reason. On contacting, we were informed that since our mother's will contained a clause - "in the event of my and my sister's death, her grandson shall be the owner of the property", the property  transfer can't be done. As we both (brother and sister) are alive, the clause is not applicable and based on the family deed the property transfer could have been effected. Kindly advise.

Also, please advise if the property can be sold by me or by my sister? Can the problem be sorted out by getting the consent of my son or a no objection certificate from him?  — P. Kumar

A.It would be desirable to obtain a letter in writing from the Estate Office detailing the reasons for the rejection of the transfer of property in your name. The Estate Office should be sent a legal notice after obtaining reasons for rejection of the transfer of property in your name and incase the Estate Office does not comply with your request you may have to approach the court for directing the Urban Estate to transfer the property in your name. The objection raised by the Estate Office seems to be an incorrect interpretation of the provisions of the Will, whereby all the rights in the property were inherited by your sister and during her life time she has a right to dispose of the property in the manner she desires. 

It would be advisable to sell the property after the dispute with the Estate Office is settled.