Your Taxes

If I booked a flat about five years back in 2010 for ₹25 lakh and got possession along with occupation certificate only in 2016, will I be entitled to pay long-term capital gain tax on sale of the flat in 2016 for ₹70 lakh? Clarify if the LTCG benefit is available three years after taking possession or three years after obtaining occupation certificate or three years after booking.

Shankar Iyer

The answer to your question would depend on the actual chain of events. There are divergent rulings on the issue of determining the holding period.

One view is that while calculating capital gain, the date of allotment is taken as the date of acquisition.The Central Board of Direct Taxes (CBDT), vide its circulars, has directed that an allottee under a self-financing scheme of Delhi Development Authority (DDA), gets title to the property on the issuance of an allotment letter. The payment of instalments is only a consequential action upon which the delivery of possession flows. Based on this circular, you could take a position that the capital gain should be long term in nature (assuming the allotment letter would have been received by you when the flat was booked during 2010).

Further, the allotment letter should contain the details of the flat in the proposed building, your name as the purchaser of the property and give you a right to hold the property.

I have taken a loan to build a house on land that is in my mother's name. My mother does not have any income. Is there a provision for my mother and I to enter into an agreement such that I will pay the entire EMI and claim entire tax exemption?

Sathish Kumaar C

As per Section 24 of the Income-tax Act, 1961, interest on loan taken for acquisition or construction of a property can be claimed as deduction from the amount chargeable to tax as “income from house property”. For this purpose, one has to be the owner of the property.

In your case, we assume that you would have obtained the required approvals from the regulatory authorities for construction of the house and that such approvals would be in your name. We also assume that you would have entered into an agreement with your mother for constructing the house in her land. If this is not the case, it would be advisable to enter into such an agreement.

Being the owner of the house, you could claim a deduction for the interest payable on the borrowed capital as follows: if the house is self-occupied, lower of ₹2 lakh or the actual interest payable; if the property is let out, the actual interest payable without any limits.

Further, deduction under Section 80Ccan be claimed for the repayment of principal subject to a maximum of ₹1.5 lakh.

Please note that these deductions can be claimed, post-completion of property construction and on the entire amount of borrowed capital since you would be paying the EMI.

Further, the pre-construction period interest can also be claimed in five equal instalments beginning from the year in which you get possession of the property.

The writer is Partner, Deloitte, Haskins and Sells LLP. Send your queries to taxtalk@thehindu.co.in

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