The Hindu Business Line : Where there is a Will, there is no tax

I received Rs 10 lakh in cash from the sale of a property which was in the name of my aunt. This sum was paid to me in accordance with a will left by her. Would I need to pay any tax on the sum received? — Rambablani

The money received will not be taxable in your hands under the provisions of Section 56(1)(v) of the Income-Tax Act, 1961, as a sum received without consideration, since the provision excludes amounts got under a will. As you got the Rs 10 lakh under a will, it cannot be taxed under this provision.

One aspect that you however need to keep in mind is whether the property in fact devolved on you under the will and if it was sold by you. In that case, the capital gains attributable to your share in the property may be chargeable to tax in your hands.

I was a salaried employee. I had placed a fixed deposit of Rs 20,000 with a bank for one year in March 2006 in the joint names of my wife and myself.

The fixed deposit matured in March 2007 and I reinvested the same adding some more funds as a fixed deposit in our joint names.

Will the interest from the fixed deposit be taxable and if so in whose hands will it be taxable? — Munish Bhatheja

The interest on the fixed deposit will be taxable. From the facts given by you, it is clear that the investment in fixed deposits was out of your own funds and not of your wife's. That being so, the interest would be taxable in your hands and not in the hands of your wife.

I work in Mumbai. I purchased a house property in my name in February 2007 in Gujarat. For this purpose I took a housing loan from Bank of Baroda.

My father resides in this house. My wife and I live in a rented house in Mumbai. Can I claim the deductions in respect of the interest on the housing loan and the principal repayment as also the exemption on House Rent Allowance in computing my total income? — Vimal Kamothi

There should be no difficulty in your claiming the tax exemption under Section10(13A) in respect of HRA so long as you are in receipt of the allowance and so long as the rent is paid by you. Insofar as claiming the deduction under Section24 in respect of interest and under Section80-C for the principal repayment of the housing loan, again there should be no difficulty.

It should also be possible for you to show the house in Gujarat as self-occupied as your father is living there provided he is not paying any rent to you. If the property is treated as self-occupied, you may note that the maximum deduction you can claim under Section 24 in respect of the interest on capital borrowed is Rs 1,50,000.

In this case, you may also take the annual value of the property as nil.

I have purchased a flat at Coimbatore in which my parents reside. I plan to buy a flat in Bangalore where I work which will be purchased in the joint names of my wife and myself.

For the period for which I was living for rent at Bangalore, I propose to claim exemption in respect of HRA and after I move into to the flat in Bangalore, I plan to show the property in Coimbatore as let out at a nominal rent of Rs1,500 per month and against the same claim the principal repayment and interest on the housing loan taken for acquiring that property as a deduction.

I also propose to treat the property at Bangalore as self-occupied, thereby treating the annual value as nil and claim the interest on capital and principal repayment of the housing loan taken for acquiring this property as a deduction. In this case as the property is jointly owned by my wife and myself and since the loan has been taken jointly will it be possible for each of us to claim the deduction in respect of interest up to Rs 1,50,000 or should this limit be computed with reference to the property? — R. Balakrishnan

There should be no difficulty in your claiming exemption under Section10(13A) for the rent paid at Bangalore for the period for which you were staying in a rented premises so long as you are in receipt of HRA.

You will also be able to show the property at Coimbatore as deemed to have been let out thereby offering the rent from the same as an income and also claiming deduction in respect of interest on the loan taken for acquiring it.

The principal repayment of the loan will also qualify for deduction under Section 80-C. The interest and the principal repayment of the housing loan taken for the property to be acquired at Bangalore will also qualify for deduction.

The maximum deduction that will be claimed in respect of the interest on this housing loan will however be restricted to Rs 1,50,000 as the property is self-occupied.

The limit of Rs 1,50,000 can, however, be reckoned with reference to each of you, that is, your wife and yourself, so long as you are the joint owners and the loan has been taken and is being repaid by both of you. The limit of Rs1,50,000 is per individual and not per property.

On the aspect of showing a nominal rent of Rs 1,500 per month from the property at Coimbatore, you may note that the law would require you to treat as income the sum for which the property can be expected to let from year to year.

It may, therefore, not be possible for you to show a mere nominal rent as your income but you would have to show as income the rent that the property would have fetched if it had actually been let to an outsider.

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