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One loan, two rebate claims

Source : BUSINESS LINE
Last Updated: Sun, Jun 21, 2009 03:59 hrs

My wife and I have jointly taken a loan for construction of a house property on land owned by me. We are both employed by the State Government.

Would it be possible for both of us to claim the tax benefits in respect of the amount paid towards EMI on the housing loan taken from a bank? The EMI is paid from our salary account. - Omprakash Srivastava

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The tax benefits in respect of the EMI - which would comprise of deduction under section 80-C on the principal repayment and deduction under section 24 on the interest - can be claimed by both of you provided both of you are the joint owners of the residential house. You have indicated that the land is owned by you.

Even in such a case if the superstructure is jointly owned by you and your wife, the tax benefits could be claimed by both of you in the proportion in which you own the same.

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There would be nothing wrong in the land being owned by one of you while the superstructure is owned by both of you.

I purchased a flat in Coimbatore in 2002 and have let it out on a monthly rent of Rs 4,000. In October 2005 I took a loan and purchased a house in Pollachi, where I work. I have been living in the Pollachi house since November 2005. I receive Rs 4,600 towards house rent allowance.

I have come to understand that the annual value of any one house property at the option of an assessee can be taken as NIL and the annual value of the other can be taken at its notional value if an assessee owns more than one house property.

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In such circumstances can I treat my property at Pollachi as deemed to be let out offering an income from the property of Rs 2,500 a month as notional rent which would be the fair rent and whereby the rent from the property at Coimbatore would be untaxed since its annual value can be taken as NIL. - S. Mohanasundaram

You cannot take the annual value of the property at Coimbatore at NIL and treat the notional value from the property at Pollachi as chargeable to tax.

The option of treating any one property as self-occupied and the other as deemed to be let out when the assessee has more than one house property would only be applicable in a case where an assessee owns more than one house property and claims that more than such house property is self-occupied.

In such a case the annual value of any one property at the option of the assessee is treated as NIL while the annual value of the other properties would be taxable on a notional basis.

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In your case, the property at Coimbatore is let out and hence the question of claiming more than one property as self-occupied does not arise and it would therefore be incumbent on you to offer the rental income from the property at Coimbatore to tax while the annual value of the property at Pollachi which you are actually occupying can be taken as NIL.

My mother who is a senior citizen owns a property in her name. She would like to sell the property to her daughter at a price lower than its market price and distribute the proceeds to her other two children who are majors. My mother is a house wife.

What will be the tax implications in respect of such a transaction? If capital gains were to arise, in whose hands would it be taxable? - Chandrashekher

If the property is sold by your mother to your daughter capital gains will arise in the hands of your mother.

This would be so notwithstanding the fact that the proceeds of sale are distributed by your mother to her children.

The provisions of section 50C would also be attracted in such circumstances.

This section provides that if the sale consideration is lower than the value adopted for registration purposes, the value adopted for registration purposes would be treated as the full value of consideration in computing the capita gains unless the assessing officer makes a reference to a valuation officer who determines a lower amount to be the full value of consideration or where the buyer goes in appeal or revision against the value determined by the stamp valuation authority and such value is reduced in such appeal or revision.

Given this background on the tax implications, it may be advisable for your mother to go for a family settlement settling the property in favour of one of her daughters who in turn would give some amounts to her siblings which would also be part of the settlement.

If this were so, no capital gains tax implications would arise.

I would like to gift a reasonable sum of money to my mother on her birthday. My mother would be investing the money in term deposits with a bank.

Will the interest be chargeable to tax in my mother's hands or in mine? - Prasad

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The interest will be chargeable to tax in the hands of your mother as the clubbing provisions will not apply when a child makes a gift to parent.

You may also note that there will be no tax implications on the gift made by you to your mother as under the provisions of section 56(2)(v), which seeks to tax sums received without consideration, there are exclusions in respect of such sums received from a relative which would also include the child of an individual.

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