Your Taxes

My son took a housing loan this financial year. Meanwhile, he has decided to pursue an MBA and so has resigned from his job. Next year onwards I am left to repay the loan. I have already availed one housing loan, for which I am claiming tax exemption. Can I claim exemption on the interest portion of my son’s loan?

L Sekar

According to the provisions of Section 24 of the Income Tax Act, for a self-occupied property, where the house was purchased or constructed within three years from the end of the financial year in which capital was borrowed, a deduction of interest payable up to a maximum of ₹1,50,000 can be claimed during a 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.

The deduction is available to the owner of the house property, in whose hands the income from that house property is chargeable to tax. In your case, we understand that the owner of the house property is your son and also the loan is in the name of your son. Therefore, you will not be allowed to claim a deduction.

My son who is an NRI, continues to hold his investments in equity shares that he subscribed to when he was a resident. Presently, he would like to sell these equity shares worth about ₹15 lakh and use the proceeds for purchasing a house in Australia, where he is going to settle. What are the tax implications of this action?

Chandran KM

The gain arising from the transfer of a capital asset, being an equity share in an Indian listed company or an equity-oriented fund where such asset was held by the assessee for less than 12 months, shall be a short-term capital gain (STCG). In case such transaction is chargeable to Securities Transaction Tax (STT), the STCG arising out of such transaction is taxable at the rate of 15 per cent (excluding surcharge and education cess).

If the holding period of the above mentioned capital asset is more than 12 months, the gain arising on transfer shall be a long-term capital gain (LTCG). In case the transaction is chargeable to STT, the LTCG arising out of such transaction shall be exempt from tax.

It is also pertinent to note that in a situation where the total income of your son exceeds the maximum amount not chargeable to tax (₹2,50,000 in case of an individual below 60 years of age for FY2015-16, as proposed by the Finance Bill, 2015), he is liable to file an India tax return.

There are certain exemptions available wherein by investing in specified assets in India, the LTCG is not taxed in the hands of the assessee. However, since the LTCG in your son’s case is exempt and he is investing in a house property abroad, such exemptions will not be available to him. Also, the provisions of the Foreign Exchange Management Act, 1999, will need to be analysed separately for permissibility of such transfer of funds from India.

COMMENT NOW