Can I claim rebate on home loan under Section24? : The Tribune India

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Can I claim rebate on home loan under Section24?

I have taken loan from a public entity ( I had got the first installment in 2/2012 and last in September 2012) under construction plan.



 

Q. I have taken loan from a public entity ( I had got the first installment in 2/2012 and last in September 2012) under construction plan. Thereafter, I have paid from my own sources. The possession is not expected before March 31, 2015, i.e. I may not be able to satisfy the condition of three years’ period to get possession of the flat, from the end of the year in which home-loan was sanctioned. Please elaborate on the provisions to claim rebate of interest on home-loan under Section 24 and payment of principal amount under Section 80C, where the possession is given after three years.

Further, what is the difference between (i) to claim rebate of interest on home loan under Section 24 as loss of property (Col. B2 of ITR) or (ii) under Section 80EE of Chapter VI A (Col. C-10 of ITR)?

— Sudesh Mohan

A. Your queries are replied hereunder:

a) Section 24 of the Income Tax Act, 1961 (The Act) deals with the deductions from “income from house property”. A proviso to clause (b) of the said Section provides that in respect of the property acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of interest paid on such capital shall be allowed as a deduction while computing income from house property. First proviso to the said clause restricts the deduction of the amount of such interest to Rs 30,000. However, the second proviso to the said clause provides that in case the capital is borrowed on or after April 1, 1999 and acquisition or construction is completed within three years from the end of the financial year in which the capital is borrowed, the allowable deduction shall not exceed Rs 1,50,000 (raised to Rs 2,00,000 w.e.f. assessment year 2015-16). Since you have acquired the house on a construction-plan basis, according to a circular of the Board, it may be construed that you are constructing the house and therefore would be eligible to claim deduction of Rs 2,00,000 from income from house property provided the construction is completed by March 31, 2015. However, as you have mentioned that the construction would not be completed by the said date the deduction under Section 24 of the Act in your case would be limited to Rs 30,000 only.

b) Deduction under Section 80C of the Act is allowable for repayment of the principal amount of loan obtained from the specified institutions for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head ‘Income from house property’ or which would, if it had not been used for assessee’s own residence, have been chargeable to tax under the said head. Such deduction would, therefore, be allowable in respect of installments paid towards the repayment of the principal amount after the construction of a residential house is completed. It may be added that the allowable deduction under Section 80C of the Act is within the overall limit of Rs 1,50,000 as specified by the said Section.

c) The Finance Act, 2014 introduced a new Section 80EE whereby it has been provided that an assessee shall be allowed, in computing his total income, interest payable on loan taken by him from a bank or a housing finance company for the purpose of acquisition of a residential house property. Such deduction is limited to Rs 1,00,000 and in case the deduction allowable for assessment year 2014-15 is less than Rs 1,00,000 the balance amount would be allowable for assessment year 2015-16. You may, thus, be able to claim this deduction for assessment years 2014-15 and 2015-16 to the extent of Rs 1,00,000 deduction together for both these assessment years in case the amount has been borrowed from the aforesaid financial institutions.

d) Where for any assessment year, the net result of computation under head “Income from house property” is a loss to the assessee, so much of the loss as has not been set off against income from any other head of income, such a loss is allowed to be carried for adjustment against income from property for a period of eight years. The column referred by you should be in respect of such a computation of loss.

e) The provisions with regard to allowable deduction under Section 80EE of the Act have been explained hereinabove.

Do I need to pay capital gain tax?

Q. I am going to sell my ancestral house for Rs 8 lakh having covered area 1680 sq.ft. that had been constructed 40 years ago. The area of plot is 300 sq. yd. and it is located in Lal Dora boundary line in my native village at distance of 25 km from the corporation limits. My queries are as under:

a) Will there be any capital tax gain?

b) In which type of account this money may be deposited.

c) Is it necessary to register the sale papers with revenue department?

d) Is it necessary for show the sale money in IT return?

— Amarjeet Singh

A. Your queries are replied hereunder:

a) In case the consideration received or accruing on sale of a residential house exceeds the fair market value of the residential house as on 1.4.81, excess will be treated as a long-term capital gain and would be subject to the payment of income-tax on such capital gain. On the basis of the facts given in the query an option to adopt fair value as on 1.4.81 is available to you as the house was constructed prior to the said date.

b) The amount of capital gain has to be deposited in the bank account under capital gain scheme account before the due date of filing the income tax return in case the amount of capital gain is intended to be utilised for the purchase or construction of another residential house. Such deposit is to be made, if an assessee is not able to utilise the amount of capital gain so arising for purchase or construction of a residential house before the said due date.

c) Sale deed will have to be registered in respect of the residential house to be sold. An immovable property cannot be transferred to another person without registration of a sale deed in accordance with the provisions of the Transfer of Property Act 1882 read with Indian Registration Act 1908.

d) The transaction of sale of a capital asset (residential house) should be reflected in the income tax return.

Investing sale proceeds

Q. I am a senior citizen who was allotted a society flat in Delhi in 1992 for Rs 6 lakh. Thereafter, I spent another Rs 2 lakh on its completion etc. but I do not possess any vouchers for the same. It is a freehold property. I now wish to sell it off for about Rs 2.4 crore. Guide me about the tax implications and how to minimise the same:

a) What type of taxes would be payable and at what percentage of the sale value?

b) After paying off all taxes and 2 per cent brokerage etc., how much balance would be left in my hand?

c) What are the available avenues for parking and/or investing the sale proceeds to lessen the tax burden?

d) If I am reluctant to re-invest the sale proceeds in another housing project, or, park it in some specified bonds etc., then where can I park it to earn a decent regular income?

— R. Chauhan

A. Your queries are replied hereunder:

a) You would be liable to pay tax on the capital gain arising on the sale of the flat. The flat having been held for more than three years period, the amount of capital gain would be treated as a long-term capital gain. The same shall be chargeable to income-tax @ 20 per cent thereon plus education cess of 3 per cent on such income-tax. On the basis of the figures given in the query the indexed cost of the flat would workout at Rs 27,55,157 and taking into account the said indexed cost, the amount of capital gain would work out at Rs 2,07,64,843. Income-tax on the said amount would workout Rs 42,77,558. You would thus be left with Rs 1,64,87,285. It may be noted that the indexed cost has been computed on the basis of the figure of Rs 6 lakh as you do not have any supporting evidence for the incurrence of Rs 2 lakh on improvements to the flat.

The following avenues are available for saving the tax on the long-term capital gain by utilising the same for:

(i) Construction of a residential house within three years after the date of sale of the flat

(ii) Purchase of a residential house within one year before or two years after the date of sale of the flat.

(iii) Purchasing tax-saving bonds to the extent of Rs 50 lakh within six months of the date of sale of the flat.

It is also possible to utilise the amount of capital gain in constructing/ purchasing a residential house as well as buying the tax-saving bonds.

b) In case you do not want to avail the avenues available for saving the tax on capital gain, it would be advisable to invest the net amount under 3 or 4 categories of investment such as fixed deposit with bank, units of debt oriented mutual funds and deposit with companies having triple AAA+ rating. You may also consider investing small percentage of funds in equity oriented mutual funds which have performed well over the years.

How can we transfer POA property in son’s name?

Q. I purchased a 700 sq. yd. plot in a village near Dera Bassi jointly with my wife on Power of Attorney basis on 12.12.2005. This village has since been included in Municipal Committee limits of Dera Bassi recently.

Now, we want to transfer this plot in the name of our son on family transfer or gift deed basis. Please guide us about the easiest and cheapest mode of transfer without involving any cash transaction.

Is there any other way to transfer of plot other than family transfer or gift deed? Please give the detail of expenses in this connection also.

A. It is presumed that apart from the Power of Attorney, an Agreement to Sell has also been executed in you and your wife’s favour. A Power of Attorney holder is normally different person than the person/persons in whose name an Agreement to Sell has been executed. A Power of Attorney holder is empowered by the seller of the property to register a sale deed or any other document for the purpose of legally transferring the property in the name of the person/persons in whose favour Agreement to Sell has been executed or their nominees. The facts given in the query indicate that it may not be possible to have a family transfer as the property has not been legally transferred to you and your wife. It should, therefore, be possible to execute a gift deed by the Power of Attorney holder in favour of your son in case the Power of Attorney holder has been empowered to transfer the property in the name of a nominee of those persons in whose favour Agreement to Sell has been executed.

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