The Hindu Business Line : Father owns house, son chips in to repay loan

I AM staying with my parents. My father owns the house in which I stay. He has taken a housing loan for acquiring this house and my wife and myself are co-applicants to this loan. My father has since retired and he is not filing any income-tax returns. The EMI is paid out of the rent that we receive from other properties. I would like to know whether I can get tax benefit in respect of the EMI given that I am a co-applicant for the loan.

As regards exemption in respect of leave travel allowance (LTA), can the same be claimed when the travel is by car (hired cab)?

Can the exemption be claimed in the last two years of the block of four calendar years?

Ramesh Gowda

Reply

In your query you have stated that your father is the owner of the house. If that were the case, the question of your claiming the tax benefits does not arise. It is only the owner of the property who can claim the tax benefits. The mere fact that you are a co-borrower of the loan will not suffice for you to make a claim in respect of the tax benefits available under the Act.

The benefit in respect of LTA can be claimed as an exemption under Section 10(5) subject to the limits prescribed. You will be able to claim the cab rental as being eligible for exemption so long as you do not exceed the limits prescribed. The exemption under Section 10(5) is available twice in a block of four calendar years. There is no bar on claiming the same in two consecutive years, which may be the last two years in the block of four years.

Query

I have purchased a flat in Bangalore for Rs 15 lakh. I am claiming the interest on the housing loan as a deduction. This property is not let. Since my place of work in Bangalore is far away from the flat that I own, I stay in a rented house which is close to my workplace. Can I also claim the exemption in respect of house rent allowance (HRA)?

Krishna

Reply

Insofar as claiming the exemption in respect of HRA under Section 10(13A), there can be no prohibition so long as you are in receipt of HRA and rent is paid by you.

The exemption will be subject to the limits and conditions stipulated in the section. You can also claim the interest on housing loan as a deduction under Section 24 in computing income from house property. The only issue would be with regard to whether the property owned by you can be treated as self-occupied.

For a property to be treated as self-occupied, the conditions to be satisfied are:

The property is in the occupation of the owner for his own residence; and

The owner does not derive any benefit from the property.

The first of the conditions, however, will not apply if the same cannot be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on in any other place, he has to reside at that other place in a building not belonging to him and provided he does not own any other residential house.

The point, therefore, will be whether you can claim that due to your employment at a different place, you are not able to occupy the flat owned by you. In this context, the Delhi High Court, in CIT vs Justice Avadh Behari Rohatgi (1986 157 ITR 441), has held that where a sitting judge of a court resided in his official residence provided by the government and kept his own house in the same town vacant, he could still claim the benefit of taking the annual value as nil, for the official residence was in New Delhi while his residence was in Delhi.

The court specifically referred to the fact that the section uses the words "other place" and not "other town". If the house that you own is treated as self-occupied, the annual value of the same would be taken as nil, else it would be taken as the sum for which the property can reasonably be expected to be let from time to time.

Query

I work for State Bank of India. I constructed a house by taking a housing loan from my employer in 1992. I also took loans from co-operative credit societies and a personal loan from a bank for constructing the house.

I prepaid the housing loan taken from my employer in September 2003.

The loans taken from the co-operative societies and the personal loan are still outstanding.

Can I claim the principal repayment and the interest on the loans that remain outstanding as a deduction even after the prepayment of the housing loan taken from my employer?

A. Pratapkumar

Reply

Under Section 24, insofar as claiming deduction in respect of the interest is concerned, the money should have been borrowed for construction of the house property.

Inasmuch as you have stated that the personal loan from the bank and the loans taken from the co-operative societies have been utilised for the construction of the property, there should be no difficulty in your continuing to claim the deduction by way of interest in respect of these loans, despite you having prepaid the loan taken from your employer.

The principal repayment of the personal loan from the bank will also qualify for rebate under Section 88 up to assessment year 2005-06 and to deduction under Section 80C from assessment year 2006-07.

As regards the loans taken from the co-operative societies, the principal repayment thereof will also qualify for the rebate/deduction if such co-operative societies are engaged in the business of financing the construction of houses.

(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.)

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