The Hindu Business Line : Husband and wife on a second house hunt

I OWN a flat in Mumbai which is registered jointly in my name and my wife's. The loan taken for this purpose is in our joint names as well. Both myself and my spouse are working.

Would it be possible for us to claim tax benefits to the extent of one-half each both in respect of the principal repayment of housing loan and interest on the housing loan? Will it be possible for either one of us to claim the entire tax benefit in respect of the principal repayment and the interest payment on the housing loan?

If I now have to purchase another flat in my wife's name in which my parents would live, can we get the tax benefits in respect of this flat as well?

Rahul

Reply

The real owner of the property can claim tax benefits in respect of the principal repayment of the housing loan and also the interest on housing loan.

One will have to see whether you or your wife is the real owner of the property, which you already own. This will decide who can claim the tax benefits. If you are the real owner of the property, though the same may be registered jointly in your wife's name, you can claim the tax benefits.

If your wife is the real owner she would be able to claim the tax benefits. If you both are owners to the extent of 50 per cent each, you can claim the tax benefits to the extent of 50 per cent each.

The manner in which the benefit is to be claimed will depend on the understanding in this regard between you and your wife and is to be based on the surrounding circumstances.

Insofar as the flat that you propose to purchase is concerned, the benefit in respect of the principal repayment of housing loan and the interest payment thereon can be claimed as stated earlier by the real owner of the flat. If your wife is not merely a registered owner but also the real owner, she can claim the tax benefits.

However, if the existing property is self-occupied by both of you and if it is owned fully or partly by your wife, the new property will have to be taken as a deemed let out property whereby a notional value will be taken and will have to be offered to tax, for only one property or part thereof can be treated as self-occupied in the hands of an individual.

If the existing property is wholly owned by you, it may be possible that the property that you propose to purchase be treated as self-occupied and in which case no notional income will be charged to tax.

The interest on housing loan can be claimed as a deduction without any limit if a property is let out or is deemed as let out. If it is self-occupied, the interest can be claimed as a deduction to a maximum of Rs 30,000 or to a maximum of Rs 1.5 lakh provided the loan is taken on or after April 1, 1999, and the purchase or construction is completed within three years from the end of the financial year in which the loan is taken.

The principal repayment on loan taken from certain specified institutions, including a bank or a housing finance company, will qualify for rebate to the extent of a maximum of Rs 20,000.

Query

My wife and I work in a government company. We bought a house property in 2003 in our joint names. We have, for this purpose, taken a housing loan from State Bank of India.

I wish to know whether each of us can claim the interest on loan as a deduction and the principal repayment as qualifying for rebate to the extent of 50 per cent each.

In such a case, if the property is self-occupied, will each of us qualify for deduction in respect of interest up to a limit of Rs 1.5 lakh each and, similarly, will the principal repayment qualify for rebate to the extent of Rs 20,000 for each of us if such repayment exceeds Rs 40,000.

C. K. Krishnakumar

Reply

If you and your wife jointly own the property to the extent of 50 per cent each, then each of you can claim the deduction in respect of interest and also the rebate in respect of the principal repayment to the extent of 50 per cent of the total, each. The limit in respect of interest to the extent of Rs 1.5 lakh for a self-occupied property is not with reference to a property but is with reference to an assessee.

Similarly, the limit of Rs 2 lakh, which is eligible for rebate in respect of principal repayment is also with reference to an assessee and not with reference to a property. Therefore, each of you can claim a deduction in respect of interest up to a maximum of Rs 1.5 lakh. And, similarly, up to Rs 20,000 will qualify for rebate for each of you.

Query

My son and I jointly own a house property. We have promoted a private limited company in which I, my son and our other family members are the shareholders.

We propose to use this house for carrying on the business of the company. Since the company has just started there is no way profit can be earned immediately.

We have therefore decided not to charge any rent for the property from the company. Can we take the annual value of the property as nil?

K. S. Kadar

Reply

It would not be possible for you to take the annual value as nil. The annual value of a property can be taken as nil under Section 23 only if the property is self-occupied. A property can be treated as self-occupied only if:

The property is in the actual occupation of the owner; and

The owner does not derive any benefit from the property.

The first of the conditions will not apply if the property is located in a place different from the place where the assessee is employed or carries on business or profession and where such property is the only one owned by the assessee.

In your case, you will not fall within this exception and, therefore, you cannot claim the benefit of taking the annual value as nil since you are not in actual occupation of the property.

It may be remembered that a company is both a separate legal and taxable entity and, therefore, the occupation for the business of the company cannot be treated as occupation by the owners who are the promoters of the company.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Investment Quiz

Mobile services — The market buzz gets louder

Senior citizens savings scheme — Poor substitute for Varishta Bima

Market drivers: Good, bad and ugly

Software earnings: Firing on all cylinders, but...

HDFC Capital Builder Fund: Hold

SBI Magnum Equity Fund: Hold

Canbank MF acquires GIC MF

Kotak 30

Infosys Technologies: Hold

Gujarat Gas: Hold