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Our Bureau

Coimbatore, Feb. 29

The Reverse Mortgage Scheme announced in the last budget did not have the expected response for want of clarity on tax treatment on one hand and the stringent rules put forth by the banks on the other.

There were only few takers to this scheme, which aimed to ensure the security of senior citizens. The Union Finance Minister has in the 2008-09 budget clarified the tax issues by proposing to amend the Income Tax Act to provide that the reverse mortgage would not amount to ‘transfer’ and the stream of revenue received by the senior citizen would not be ‘income’.

Reacting to the announcement, Ms Renu Sud Karnad, Joint Managing Director, HDFC Ltd, welcomed the latest move wherein a reverse mortgage would not be regarded as a transfer of a capital asset and therefore not attract capital gains tax.

“Secondly, the loan amount would be exempt from Income Tax in the hands of the borrower. Unfortunately, no tax benefits have been extended to housing finance lenders as regards reverse mortgages,” she said.

More Stories on : Budget | Mortgage

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