Your taxes

I took a housing loan from a bank. I now plan to repay it with funds borrowed from my Hindu Undivided Family (HUF), in which I am the Karta (patriarch). I plan to pay the interest to my HUF. Can I claim a deduction on the interest paid to my HUF under Section 24(b)?

- Santhosh H

Deduction of interest payable on a home loan can be claimed under the head “Income from house property”. According to the provisions of Section 24 of the Income Tax Act, 1961, for self-occupied properties, where the house was purchased or constructed within three years from the end of financial year in which capital was borrowed, a deduction of interest payable − up to a maximum of ₹1,50,000 − can be claimed during the year. In case the property is let out or deemed to be let out during the year, interest actually payable during the year can be claimed from the annual rental value of the house property. The deduction will be subject to a certificate from the lender specifying the interest payable during the year on the capital borrowed.

In your case, you can claim deduction of interest paid to the HUF provided a certificate specifying the interest payable during the year is taken from the HUF. Please note that the HUF would need to report the interest earned as income in its income tax return.

I rented out my house to a company, for which I will receive ₹1,95,000 for the year ending March 31, 2015. The company wants to deduct tax at source at 10 per cent of the total amount. Kindly clarify whether TDS is applicable on the total sum or on the sum exceeding the limit of ₹1,80,000.

DRG Sarma

As per the Income Tax Act, 1961, any taxpayer that is neither individual nor Hindu Undivided Family and pays to a resident any income by way of rent for the use of land and building shall deduct tax at source at the applicable rates at the time of credit of such income to the account or at the time of payment, whichever is earlier, provided the rent paid during a financial year (April 1 to March 31) exceeds ₹180,000.

In your case, the company that rented your house shall deduct tax at 10 per cent of the total amount (₹1,95,000). Credit of the tax deducted at source can be claimed when you file your income tax return.

I plan to sell a residential plot in Hyderabad and would like to buy a residential house in Vijayawada. I would like to deposit the sale proceeds in a capital gains account with a nationalised bank. How long can I keep this money in the capital gains account before I buy the house property in Vijayawada?

- V Sivaram

According to Section 54F of the Income Tax Act, 1961, if an individual sells a long-term capital asset (other than a residential house), the long-term capital gains may be exempt from tax in case the sale proceeds are invested in a residential house property, subject to satisfaction of other prescribed conditions.

Section 54F provides that the individual should either purchase a new residential house within one year before or two years after the date of sale of the original capital asset. According to the Act, the amount of net consideration which is not appropriated/utilised for purchase of the new asset before the due date of filing the tax return should be deposited in an account with the specified bank before furnishing the tax return.

Please note that such amount can be kept in the specified account until it is utilised for the purchase of the new asset within the period specified above. After the specified period lapses, the unutilised amount shall be dealt with according to the relevant provisions of income tax law.

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