Your Taxes

I retired in March 2016 but have a housing loan which will run till October 2018. I get some amount as interest from FDs well below the taxable limit. From May 2016, I have started working as a consultant for a company and I will be paid a fee for my work. In case my income exceeds the taxable income threshold in FY 16-17, can I claim the housing loan benefits? I am told that my employer will deduct TDS at 10 per cent.

C K Natarajan

Yes, you will be able to claim the housing loan benefit.  The loss arising under the head “house property” can be set off against all other heads of income (except winnings from lotteries, crossword puzzles and card games).  Therefore, you should be able to set it off against your consultancy and interest incomes in the year in which the loss is incurred.  The maximum amount of interest that can be claimed as deduction under the head “Income from house property” would be ₹2 lakh (as applicable for the financial year 2016-17) if the property is self-occupied.  In case it is let out, the entire amount of interest can be reduced from the rental income.

Since your employer deducts TDS at the rate of 10 per cent, the refund if any, arising on account of set-off of the house property loss can be claimed in your income-tax return.

  My son works in an Indian company and is on a sabbatical, pursuing higher studies in the UK. He took an educational loan from a foreign financial firm based in the US. Also, he got financial assistance from an Endownment Trust in India based on his performance in his present course of study. Is he eligible to deduct the principal and interest repayment to the foreign financial firm from his taxable salary in India? What are the tax implications for assistance received from the trust?

M Palaniswamy

 As per section 80E, an individual can claim deduction only for the repayment of interest paid on education loan. Further, the deduction can be claimed only if the loan is taken from an eligible “financial institution” as defined in the Act. For this purpose, a financial institution is defined to mean a banking company to which the Banking Regulation Act, 1949 applies or any other financial institution which the Central Government may specify. . 

 Considering the above, the foreign financial firm based in the US may not qualify as a banking company defined above since it may not be into the business of banking in India. Accordingly, it may not be possible for your son to claim deduction for the repayments made (both principal and interest) from his taxable salary income.

 With regard to the scholarship received in pursuit of his higher education, this could be claimed as exemption under section 10(16) of the Income tax Act, 1961 and can be reported in the Income tax return under “Schedule EI”.

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

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