The Hindu Business Line : What's the standard?

Standard rent is fixed by state governments under the Rent Control Law. The idea is to keep rents within prescribed standard limits. The market rent and the actual rent received are compared, and the higher value taken when computing the annual value of a let-out property. If the market rent is higher than the standard rent, the excess is ignored. But if the actual rent is higher than the standard rent, the excess will not be ignored.

Better late!

I started repaying the housing loan even before the completion of construction. Will I get Section 80C deduction?

Sulochana Mahadevan, Chennai

Section 80C grants deduction toward repayment of housing loan only when the house property can be assessed under `income from house property'. But your house is under construction and cannot be so assessed. Under Section 24, interest during the construction period is allowed for deduction in five equal instalments spanning five assessment years.

One for the other

I recently sold one of my two houses, which I owned for the last twenty years. The second house is an independent bungalow with only a ground floor. Can I use the proceeds from the sale of the first house to finance the construction of a first floor and claim tax exemption under Section 54?

Praveen Bhai Patel, Gandhinagar

Yes, the only limitation is that you should complete the construction of the first floor within three years from the date of transfer of the first house and, pending such construction, you must deposit the long-term capital gains under the Capital Gains Account Scheme with any authorised bank on or before the due date of income-tax return for the year in which the house was sold. The law insists on such deposit to make sure that the long-term capital gains are used only to finance another house. The additional floor should be an independent unit with a kitchen, bathroom etc.

I have booked a house in Secunderabad and the builder has promised to hand it over by December 31, 2005. I want to dispose of my house in Chennai. Will I get tax benefit under Section 54 if I sell it after taking possession of the new house at Secunderabad?

S. Sridhar, Hyderabad

The CBDT has opined that construction of a house under the self-finance scheme of the Delhi Development Authority is construction and not purchase. The difference is crucial because, while you can buy within one year before or within two years after the date of transfer of the original house, construction must be completed within three years. Now, the tax authorities would term your acquisition as `construction' and not `purchase'. Admittedly, construction by a builder is also a self-finance scheme. Therefore you would do well to dispose of the Chennai house before completion of the Secunderabad house.

The author is a Delhi-based chartered accountant.

(Send in your questions on real estate to TheRealMcCoy@rediffmail.com)

S. Murlidharan

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