Can I make payment on behalf of wife and get exemption?

S. C. Vasudeva

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Q.I am working in Punjab Government and my wife is working in State Bank Of India. I had purchased a built up house constructed by a governmet agency in Pathankot, in March, 2005. In 2009, my wife was also allotted a residential plot in Jalandhar. In 2010, a house was also constructed on it by taking loan from a bank. Now, an apartment has been allotted to my wife in Mohali by GMADA in April 2015. My query is that: Can, I make the payment to GMADA on behalf of my wife by selling the house purchased in my name at Pathankot and claim exemption on long-term capital gain under Section 54 of the Act.

— Amanjeet Singh

A.According to the provisions of Section 64 of the Act any amount of income arising directly or indirectly to an assessee from an asset transferred to the spouse otherwise than for adequate consideration or in connection with an agreement to live apart shall be treated as assessee's income. In view thereof, payment to GMADA on behalf of your wife would be hit by the aforesaid provisions and therefore, income arising from the apartment shall continue to be taxable as your income. In case only a part of the amount is paid, the clubbing provisions would be applicable to the extent of income arising on the amount so paid. It may not be possible for you to claim exemption under Section 54 of the Act as the residential house has to be purchased in the name of the assessee who is liable to pay tax on long-term capital arising on the transfer of a capital asset.

Owner can claim rebate in benami deal

Q.A flat was purchased by my son-in-law in the name of my daughter in order to save stamp duty. My query is, whether he is entitled to claim rebate on repayment of loan amount and interest charged on it.

— K.S Dadwal

A.Your son-in-law would be entitled to claim deduction in respect of the repayment of loan in case the residential house property is reflected in his tax return as the property is owned by him and not by his wife. He will have to make a declaration that he is the real owner of the property and your daughter is only a name lender or a benami as the purchase consideration for the acquisition of the property has been paid from his sources and your daughter has not spent any amount towards such purchase.

Can my wife seeks income tax rebate on joint home loan?

Q.My wife and I are salaried employees and we have recently taken a home loan jointly and the apartment is also owned jointly by both of us. I have been paying the EMI from my salary and other household expenses are being incurred from the salary of my wife. My queries are:

• Can both of us claim income tax rebate proportionately as we are not paying separate EMIs?
• How much interest rebate could be claimed in a year?

— R.K. Gupta

A.Section 80C of the Income Tax Act, 1961 (The Act) provides that in computing the total income of an assessee, being an individual there shall be deducted, in accordance with and subject to the provisions of this Section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2) of the said Section which does not exceed Rs 1,50,000. One of the items covered in sub-section (2) is the amount paid towards the repayment of loan borrowed from specified sources for purchase or construction of a residential house property, income of which is chargeable to tax under the head 'Income from House Property' or which would have been so chargeable, if it had not used for assessee's own residence. In view of the above provisions of the Act, deduction for the amount paid towards the repayment of the loan borrowed from specified sources would be allowable to an assessee who has actually made the repayment of the amount. Therefore, in the case cited in the query, deduction under Section 80C of the Act would be admissible to you provided the amount has been borrowed from the source specified in the said Section. Your wife would not be entitled to claim the deduction as no amount has been repaid by her against such loan.

Deduction in respect of interest paid/payable on the loan for the purchase or construction of a house is allowable to the extent of Rs 2,00,000 in case of self- occupied house, if the acquisition or construction of the house property is completed within three years from the end of the financial year in which the amount was borrowed. This deduction is also allowable against 'income from house property'. In case the acquisition or construction is not completed within the period referred to hereinabove, deduction in respect of such interest is allowable to the extent of Rs 30,000 only. It may be added that the aforesaid limits are applicable only in case the property is self-occupied.

Transfer of property to nephews

Q.I want to transfer some part of my purchased agricultural land (in Punjab) to my nephews (brother's sons). Will this be considered blood relation transfer of land? — Pal Singh Nirmaan

A.The Notification issued by the Punjab Government covers the following relatives as blood relations for the purposes of exemption from the charge of stamp duty:

"Children, grand children, brothers and sisters".

In view of the above Notification transfer of land to nephews (brother's sons) will not be covered within the aforesaid Notification and therefore, such transfer will attract payment of stamp duty at the specified rate.

What are TDS rates for NRIs?

Q.Please clarify the following points:

• Whether one is eligible for capital gain tax benefits if one sells one residential house out of two owned and invests sale proceeds in purchasing another house for own residential purposes.
• TDS rates applicable for NRI seller for sale of residential house.
• Whether TDS should be deducted on net sale proceeds or on capital gains on self-assessment if the return is to be filed in the next AY.
• Whether assessment for next AY is possible & if so please advise procedure.

— Ramavtar Banga

A.Your queries are replied hereunder:-

• An individual assessee is eligible to claim benefit under Section 54 of the Act in respect of the amount of capital gain arising on sale of a residential house out of the two houses owned by him, if the amount of long-term capital gain so arising is utilised towards the purchase of one residential house within the specified period.
• A purchaser will have to deduct tax on gross amount of consideration payable to NRI under Section 195 of the Act. Presently, the specified rate is 20.6 per cent in case the income from capital gain is less than Rs 1 crore. In case it is more than Rs 1 crore the applicable rate would be 22.66 per cent.
• Income tax is deductible from the gross amount of consideration. In case the transferor is a resident in India, income tax would be deducted from the gross amount of consideration @1 per cent thereof. Deduction at source in respect of income-tax has to be made at the time of payment of the consideration to the seller even if the transaction of sale would be reflected in the next assessment year.
• Assessment for the next assessment year is possible in case a person is leaving India during the current assessment year or shortly after its expiry in case he has no present intention of returning to India.

Buying two houses to offset capital gain

Q.Can I buy two houses with the total sale proceeds of a plot of land, bought 10 years ago? I have no house of my own at present.

— S.S.Bhullar

A.Section 54F of the Act provides for exemption from taxability in respect of the amount of long-term capital gain arising on the transfer of a capital asset other than a residential house provided the 'net consideration' (the amount of full consideration received or accruing as a result of transfer of a capital asset as reduced by any expenditure incurred wholly and exclusively in connection with the said transfer) is utilised for the purchase or construction of a residential house within the specified period. It has been held by various courts that the exemption is admissible only in respect of one house which is purchased or constructed. This is because the Section specifically provides that the exemption shall not be available in case the assessee owns more than one residential house other than that which is being acquired on the date of the transfer of the capital asset. In my opinion, you would not be entitled to claim the exemption under Section 54F of the Act in case you purchase two houses by utilising the total sale proceeds of plot of land bought 10 years back.