The Hindu Business Line : Taxing questions on housing

I and my wife jointly purchased a flat in 2002. A loan was taken in our joint names for acquiring the property. We have been sharing the repayment of the loan from our incomes.

We are planning to acquire another flat under my wife’s name. Since my wife already owns 50 per cent share in the existing property, she will have to offer to tax the notional income from the new property since Section 23 only permits one house to be treated as self occupied.

Given this situation, we have been advised that we could consider treating the amount paid by my wife towards the housing loan as a loan owed by me to her and for me to repay the entire amount to her or alternatively to make out a case to s tate that my wife’s name was included in the document of purchase of the first flat only as a matter of abundant caution and convenience.

We are also considering the possibility of registering the new property in our joint names with my wife being named first in the document. — Venkat Rajan

You will have to appreciate that altering the actual facts at this stage may not be advisable and appropriate.

Any attempt to do so may land you in greater problems and it would be better to refrain from trying to alter the facts. From your query it is not clear whether you really intended the first property to be a jointly owned one or whether at that time you merely included your wife’s name as a matter of abundant caution.

You will also have to see whether your wife has claimed the tax benefits in respect of the EMI paid by her in which case it would obviously mean that she intended to be the joint owner and was in fact one at the time of purchase of the first flat.

To now say that the same was given as loan to you may not be possible in such circumstances.

Your options will be restricted in such cases to either reconciling to offering the notional rent as the income in the hands of your wife or to purchasing her share in the property which will involve stamp duty and registration implications.

You may, however, note that the option of offering the notional income to tax can be exercised by the tax payer in respect of any of the properties owned.

Your wife can therefore choose to offer the notional rental income from the property owned by her to the extent of 50 per cent instead of the notional rental income from the new property if that is more beneficial to her.

It is assumed that neither of the properties will be actually let in which case the question of offering the notional income does not arise since the actual income from property will then have to be offered to tax.

I purchased a flat in November 1981 for Rs 61,000 at Thane. Thereafter, I purchased another flat in the same apartment in 1997 for which I took a loan.

In November 2006 I sold the flat purchased by me in 1981 for Rs 6 lakh.

In October 2006, I booked a flat at Pune in the joint names of my wife and myself. I also took a bank loan for purchasing this flat which cost me Rs 27 lakh.

I have also used the proceeds of Rs 6 lakh from the sale of the flat for purchasing the new flat. This investment was done by me before April 2007.

Will I be entitled to exemption in respect of the long term capital gains particularly given that I have purchased the new flat in the joint names with my wife being the first named in the agreement? — Jaiprakash

There should be no difficulty in your claim for exemption under Section 54.

This exemption is available since you have invested the capital gains from the sale of the flat in another residential flat.

Since the investment has been made by you within the same financial year the exemption can be claimed by you under this Section.

My company has taken houses on lease and let it out to its employees. These properties are located at Ranchi— where the population as per the 2001 census is between 10 and 25 lakh.

The employer does not collect any rent from the employees.
For the financial year 2005-06, 2006-07 and for the current financial year can the value of perquisite in the hands of the employees be taken as per the law as amended by the Finance Act , 2007 with retrospective effect from April 1, 2006?

Is it necessary that some rent must be recovered from the employees for this provision to be applicable?
If the amended law can be taken for the earlier years where my employer may have deducted excess tax at source, can the employees file a return or a revised return and claim refund? — Kishan Agarwal

You are right in pointing out that the Finance Act 2007 has amended Section 17(2) with retrospective effect from assessment year 2006-07.

In the query raised by you, the value of perquisite will be taken at 15 per cent of the salary or the lease rental paid or payable by the employer whichever is less.

There is no requirement to have any sum recovered from employees for this to be applicable.

You may also note that this will be applicable from the assessment year 2006-07 i.e financial 2005-06.

If your employer has deducted excess tax at source in any of these years a refund can be claimed by the employees by filing a return or if the return has been filed without claiming proper refund by filing a revised return.

You may note that Section 139(5) permits the furnishing of a revised return at any time before the expiry of one year from the end of the relevant assessment year or before completion of assessment, whichever is earlier, if the original return has been filed within the time allowed under Section 139(1) or in response to a notice under Section 142(1) and where a omission or wrong statement is found in such return.

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