Your Taxes

I am a senior citizen and retired in 2013. I own a house in town A in my name, which has been let out. At present, there are no encumbrances over the property. Another house is owned in the joint names of me and my wife in town B. For this house, a loan of ₹10 lakh has been borrowed in our joint names. This house in town B has been occupied since April 30, 2016. The repayment of housing loan is from my current income. Please advise me on the tax benefits that are available. Also, let me know whether the rent earned from town A is to be computed for taxable income after netting out repairs and municipal taxes paid.

A S D Prasada Rao

As per the provisions of the Income-tax Act, 1961, an individual can avail tax benefits on more than one house property during a financial year. We understand that the house in town A has been rented and the one in town B is self-occupied. Further, you have got a loan of ₹10 lakh for the house in town B. While computing your taxable income, you can claim deduction for the interest payable against this loan up to ₹200,000 (since the house is self-occupied). Apart from the deduction for interest, you can also claim deduction under Section 80C for the principal repayment subject to the overall limit of ₹150,000. In general, the interest and principal amount deduction is to be claimed in proportion to the ratio of ownership among the co-owners. However, since the loan is entirely being repaid from your income, you can claim deduction for the total interest payable during the year, subject to the threshold limit of ₹2,00,000. 

 With respect to the income from property in town A which has been let out, you can claim deduction for the municipal taxes paid during the financial year from the gross rental value. Further, a standard deduction of 30 per cent can be claimed on the resultant value (gross rent – municipal taxes) for repairs and maintenance of the property.  This is irrespective of whether actual repairs are undertaken or not. 

My son resides abroad. Most of his savings are in FD with a nominal amount in SB (NRO) account. He has now acquired foreign citizenship (and OCI card) and taken a bank loan to purchase a flat (in the UK). Can he transfer funds from these two accounts to the UK to reduce the bank loan? Is there a limit to such transfers? What is the tax implication on such transfer?

Venu Nallur

 As per the exchange control regulations, a person of Indian origin (PIO) can remit an amount not exceeding $1 million per financial year (April 1 to March 31) out of the balances held in the NRO account. Your son will be a PIO under the regulations and hence can transfer funds from his NRO account subject to the annual threshold. 

For this purpose, he would have to issue an undertaking along with a certificate in Form 15CB from a chartered accountant (who would evaluate and comment on the tax liability of this transaction) to the authorised dealer bank. The bank would peruse the documents and authorise the remittance.

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

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