Can I claim rebate under house building construction head?

Q. I’m a central government employee, I have taken a loan of Rs20 lakh from SBI in year 2014-15 (jointly with my father) for construction of first and second floor at Mohali. EMI is paid by me. Registry was in my father’s name but in January 2016 the house has been transferred in my name. I want to know whether I can claim income tax rebate under house building advance/construction category?

S. C. Vasudeva

Can I claim rebate under house building construction head?

Q. I’m a central government employee, I have taken a loan of Rs20 lakh from SBI in year 2014-15 (jointly with my father) for construction of first and second floor at Mohali. EMI is paid by me. Registry was in my father’s name but in January 2016 the house has been transferred in my name. I want to know whether I can claim income tax rebate under house building advance/construction category?

— R Singh

A. You should be able to claim deduction in respect of the amount repaid towards the loan taken from SBI for construction of a residential house. Such deduction shall be admissible in respect of repayment made after January 2016 i.e. after the transfer of the house in your name. The deduction can be claimed under Section 80C of the Income Tax Act, 1961 (The Act) which also covers other sums paid or deposited for various savings scheme. The maximum admissible deduction under the said section is Rs1,50,000.

Change in Will

Q. I am an 80-year-old person living in Haryana and I have two sons. Some 15 years back I had bought some land. At that time when I applied for a home loan my application was rejected because of my age (over 60) as I was have two sons when I bought the Land, I was working and was above 60 years. So I had to register the land jointly with my elder son so that we could take loan.

However, I managed to construct the ground floor of the house from my own funds and did not use the loan amount for it. My elder son built the first floor from his own sources. He did not pay anything for the cost of land at all.

Now I have some serious differences with my elder son and as my younger son and his family are living with us and taking care of us, I have registered a Will according to which the ground floor will be inherited by my younger son after my death, while the first floor will be with my elder son. The second floor, if constructed, will be shared by both of them.

My queries are:

a. Can my elder son go to court to claim his share in the ground floor as he is the co-owner of the land?

b. Does my younger son have the right to a share in the second floor. Can my elder son object his claim?

— Vishwanath

A. It would be advisable for you to make a ‘Codicil’ amending your Will so as to provide that your share in the land and the ground floor constructed by you with your earnings shall be inherited by your younger son. The Codicil so made should also be registered. Your younger son should get the mutation of the house done, after your death, on the basis of the registered Will and the Codicil. This would avoid any dispute regarding the ownership of the land on which the house had been constructed.

Your earlier Will along with Codicil should enable your younger son to avoid the dispute (being owner of 50 per cent share in the land) with regard to the sharing of the ground floor as well as with regard to the future construction, if any. This is because your elder son would not be able to take up the construction of the second floor without the consent of your younger son.

Your elder son has a right to contest the Will as well as the Codicil but chances of his getting any relief would be bleak.

His right to contest the Will can’t be curtailed. I have suggested a way out to deal with your problem on the basis of my experience dealing with disputes amongst brothers, I would however, suggest that the issue raised by you has implications of civil law and therefore, you should consult a civil lawyer to avoid a future dispute between the brothers.

How can one ascertain legal status of a property?

Q. We have encountered a fraud on the purchase of agricultural land. Last year, we purchased the land on a purchase agreement. However, the seller bribed the patwari for not referencing “court’s stay” in the land records. After citing the undisputed RTC extracts ( fard) we made the partial payment.

After a few days, the seller told us about the court’s stay by exhibiting the new fard. We have sued the fraudster. My queries are:

Is there a way to know about court’s stay or any dispute on a land even if the patwari does not mention it in the land record or fard?
In how many days do the patwaris have to upgrade their record if a court stays on a land and on which register would they record such tranactions?

— Dev

A. Your queries are replied hereunder:-

a) It is always advisable to seek a search report from an advocate about the case/cases pending in the court with regard to the particular agricultural land and whether any stay has been granted by the court to deal with such agricultural land in any manner whatsoever . This would avoid the problem being faced by you.

b) A patwari should record the stay immediately after the information is received by him on the basis of court order filed with him. There is no reason that such matter should not be recorded immediately.

Service tax payment confirmation from builder

Q. Kindly clarify the following:

i) Is service tax payable even after the builder has been issued completion certificate or partial completion certificate by the authority concerned?

ii) Which proof can we demand from the builder regarding the amount paid to the authorities concerned which has been received from us with respect to the service tax?

iii) If service tax paid to the builder before issuance of completion/partial certificate shall continue to be paid after issuance of completion/partial certificate in respect of the balance payments towards the flat/house?

— Krishan Singh

A. Your queries are replied hereunder:

a) The definition of the taxable service in relation to construction of complex service was amended w.e.f. 01.07.2010 by adding an explanation. The scope of amendment was also explained by CBEC by issuing a clarification in respect of such amendment. According to this clarification unless the entire payment for the property is paid by the prospective buyer or on his behalf after completion of the construction including a certification by the legal authorities, the activity of construction would deemed to be a taxable service provided by the builder. Therefore, if the completion certificate has been issued to the builder and the entire payment is made thereafter by a prospective buyer, there should not be any levy of service in such a case. The words used in clarification being 'Completion Certificate' partial completion certificate, if any issued by authorities may not be recognized by the service tax authorities.

b) You can seek a declaration from the builder that the service tax, if any, received from the prospective buyers has been paid to the service tax authorities. Service tax is payable at a specified rate. It can be paid along with installment or in one go as per the terms agreed with the builder.

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