The Hindu Business Line : Can deductions be claimed from three housing loans?

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Can deductions be claimed from three housing loans?

T. Banusekar

I have three houses. While I took bank loans for constructing two of them, I took a loan from my employer for the third one. All three houses are at present let out.

I stay in my employer’s quarters with my parents. The rent received from these three properties is offered to tax by me as income, under the head income from house property.

I am also paying the EMI on the housing loans taken from the bank as well as the monthly installments for the loan taken from my employer, which includes interest and principal repayment.

Will the principal repayment of the housing loan for all the three houses qualify for deduction under Section 80C? If the same will qualify, can I furnish particulars of the same to my employer, who may take the same into account in determining the tax to be deducted on my salary? — G. Nambirajan

It appears that there should be no difficulty in claiming deduction under Section 80C in respect of the principal repayment on the loan taken for all the three house properties. A doubt if at all in this connection may arise because of the use of the words “a residential house property” in Section 80C(2)(xviii) of the Act.

It may, however, be noted that under Section 13 of the General Clauses Act, the reference to singular will include the plural unless the context otherwise requires.

Therefore, a safe view can be taken that deduction under Section 80C can be claimed in respect of the principal repayment of the loan taken for all three house properties.

It will also be possible for you to give the particulars of your principal repayment of the housing loans to your employer, who may take the same into account in determining the tax to be deducted at source.

You may, however, note that the principal repayment of the loan taken from your employer will qualify for deduction, only if your employer is an authority or a board or a corporation or any other body established under any Central or State Act or is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society.

My mother owns a land, which she proposes to sell. Before selling the same, she proposes to gift a portion of the land to my father and myself. Subsequently, we (my father and myself) are planning to sell the land that will be gifted to us.

In the process we expect a substantial saving of tax, as both my father and I do not have other incomes.

We understand that if the property is sold by my mother before making such gifts, the capital gains tax is likely to be much larger.

In such circumstances, can we save more taxes if we sell the land after it is gifted to us? — Amol

There is no prohibition on your mother gifting the property to you and your father, before the sale of the land if doing so reduces the tax liabilities the tax authorities cannot and should not object to the same merely on this ground.

It should be remembered that every person is entitled to arrange his tax affairs such that his tax liability is the least. The only caution is that transactions should not be entered into, which are otherwise a sham.

ABC Ltd is an unlisted company and has acquired the entire shareholding of XYZ Ltd. XYZ Ltd thus became a 100 per cent subsidiary of ABC Ltd. The shareholders of XYZ Ltd were allotted shares in ABC Ltd at the time of acquisition of XYZ Ltd by ABC Ltd.

Will the share holders of XYZ Ltd be liable for capital gains tax on such allotment of shares of ABC Ltd in exchange for the shares held by them in XYZ Ltd? — Rajesh Keshry

On the allotment of shares of ABC Ltd to the share holders of XYZ Ltd on the acquisition of XYZ Ltd by ABC Ltd, there will be the exchange of shares by the shareholders of XYZ Ltd by shares of ABC Ltd in exchange for the shares held by them in XYZ Ltd.

This exchange will be a transfer within the meaning of Section 2(47) of the Act. Since shares are capital assets as well, capital gains will arise in the hands of shareholders of XYZ Ltd at the time of such exchange.

I have purchased shares of a company in demat form.

I purchased these shares at different points of time and at different prices.

While computing the capital gains at the time of sale of these shares, would it be possible for me to decide which lot of shares should be taken as sold, so that I would be able to reduce my capital gains tax? — Krishnamurthy

It would not be possible for you to choose and decide which lot of shares have been sold by you for the purpose of computing your capital gains. This would not be possible since Section 45(2A) provides that where the shares are in dematerialised form, the cost of acquisition and the period of holding should only be determined based on the first-in-first-out method.

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