Financial Daily from THE HINDU group of publications
Sunday, Jun 23, 2002
Columns - Tax Talk
Housing loans: Different angles to tax breaks
A: WHERE a property is owned by two or more persons and where their respective shares are definite and ascertainable the share of each such person in the income from the property is to be computed in accordance with Sections 22 to 25, and shall be included in their total income. In the reader's case, if the shares of the reader and his wife are definite and ascertainable, each of them will be entitled to a deduction under Section24 in respect of interest on borrowed capital. Interest on borrowed capital is allowed as a deduction subject to the following limits:
This ceiling limit is applicable only if the property is self-occupied. If the property were let, the deduction in respect of interest can be claimed against rental income without any ceiling limit.
The reader cannot claim that rebate should be available to him in respect of the sum for which his wife has not been entitled to the rebate, because the repayment exceeds the limit set out in Section 88.
B: If a self-occupied property is co-owned, there seems to be no prohibition on each of the co-owners claiming the deduction subject to the above limits.
The same will be the position in respect of rebate under Section 88, with each of the co-owners entitled to the rebate for the principal repayment of the housing loan, provided such housing loan is taken from a specified bank or institution.
C: The same will apply if the father takes the loan. The son cannot claim rebate and deduction in respect of interest unless the income from the property is assessable in the hands of the son.
D: The Board has vide Circular No.28 dated August 20, 1969 clarified that interest on a fresh loan taken to repay the original loan will qualify for deduction if the second borrowing has been used merely for repaying the original loan. This Board Circular has also been given statutory recognition by the Finance Act, 2002.
E: Interest on loan borrowed for repairs, renewals or reconstruction will not qualify for the enhanced deduction of Rs1.50 lakh if the property is self-occupied.
This enhanced deduction is available only if the borrowal is for purchase or construction of a house property.
F: For claiming interest as a deduction under Section 24, it is not required that the loan should have been taken from any specified institution. However, for claiming rebate under Section 88, the repayment should be in respect of an amount borrowed from:
The Central or any State Government.
Any bank, including a co-operative bank.
The Life Insurance Corporation.
National Housing Bank
A Public Company registered in India providing long-term finance for housing and qualifying for deduction under Section 36(1)(viii).
A company in which the public are substantially interested, or any Co-operative society engaged in financing for construction of houses.
An assessee's employer where the employer is a public company, public sector company, university, college affiliated to such university, local authority or a co-operative society.
G: Interest on the loan paid up to the previous year immediately preceding the year in which the property is purchased or constructed, can be claimed in five equal instalments commencing from the previous year in which the purchase or construction is completed. This, however, will be subject to the ceiling limit if the property is self-occupied.
H: If a property cannot actually be occupied by the owner because of his employment being at any other place, and he has to reside in that other place, the annual value of the property may be taken as nil. However, only one property owned by an assessee can be taken as self-occupied. Interest can be claimed as a deduction in respect of this property subject to the ceiling limits applicable to a self-occupied house property. In respect of the rent paid by the reader, exemption can be claimed under Section 10(13A). This exemption is available to the extent of the least of the following:
I: If the individual's parents live in a property owned by the assessee, with the individual living in rented property, it is felt that the property should be treated as self-occupied, provided no benefit is derived by the individual from his parents in respect of the property.
J: Section 24 allows a deduction in computing income from house property in respect of any interest payable on capital if the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital.
Construction of a house property would necessarily mean that land needs to be acquired.
Therefore, it is felt that the deduction in respect of interest should be available in respect of the loan taken for purchase of the land as well.
Reference in this connection may be made to Circular No. 667 dated October 18, 1993 in the context of Section 54/54F where the Board had clarified that for computing the exemption under the Sections, the amount paid towards purchase of a plot and also towards construction of residential house thereon will qualify for the exemption.
The principal repayment of my wife in respect of the housing loan will not qualify for the rebate under Section 88 as the same will be in excess of the limits prescribed. Can I use this excess of principal repayment to claim rebate under Section 88 in my hands?
A. L. Sivasankar
A. S. Panchapakesan
: Where a house property is situated in a place other than the place where the assessee is employed, can the income from such property be taken as `nil'? How is the deduction to be claimed in respect of interest in such cases? If I live in the place of my employment in a rented premises, can I also claim the exemption under Section10(13A) for HRA in computing salary income?
K. Shitiz Varma
T. N. Shah
Send this article to Friends by E-Mail
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |
Copyright © 2002, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line