Q.I am a private sector employee in the
30 percent tax bracket. I was allotted a residential flat in a Housing Authority in March
2001. How can I claim tax benefit for the flat allotted to me? The cost of the flat is Rs.
8.95 lacs and the super area is 85 square metres. I have already paid about 25% of the
estimated cost during the current year 00-01. I am required to pay the authority quarterly
installments for next six years.
Should I obtain the certificate from the Housing
authority to claim the interest and the principal amount. Does the statement prepared by
The above flat is not under my possession nor has it
been constructed so far. It will be handed over at end of the year 2003. How can I claim
rebate/deduction while filling income tax return?
I have paid the above amount from personal loan from my parents and
uncle. How can I show this in my income tax return?
Ans: Based on the facts , it is
clear that the flat for which you are making the payment has not yet been constructed.
Therefore the question of giving possession to you does not arise. You can not claim any
deduction or tax rebate while filling income tax return. Later on when the flat is ready,
you can claim tax deduction in respect of the interest on loan as well as rebate on
principal amount.To arrive at the figure for principal and interest, you must obtain a
certificate or a statement from the Housing authority.
Q.I intend to purchase a residential flat in a
Housing Society from the original allottee through power of attorney. I am planning to
take a home loan from financial institution like HDFC/CAN FIN by mortgaging another
property belonging to my wife, who is a co- applicant. The society does not have C& D
certificate as on date. As such I will not able to register the flat in my name (first
applicant) and my name will only appear in the power of attorney.
Whether the interest and principal towards re-payment of my loan for
purchase of flat in the Housing Society quality for income tax rebate.
Ans: Even in respect of power of
attorney flat or property, benefit of tax deduction in respect of repayment of interest is
available. What is important is not merely the registration of power of attorney but
possession of the concern property.
Q. My father has already expired. Under his will he
divided his property between me and my brother. The will clearly mentioned that property
is being divided between my brother 's HUF consisting of my brother, his wife and his son,
and my HUF consisting of my wife, my daughter and me. On the basis of above will, I am
regularly filing income tax returns of the HUF since 1990 which are being accepted by the
IT department and a permanent account Number has also been allotted to the HUF. Please
note that I have no son till date.
Is my HUF created valid under the IT act.
Who will inherit the HUF property (suppose my wife also
dies) as there is no son, but only a daughter after my death.
Ans:The HUF, which
comes in to existence through the will of your late father is perfectly in order. What is
required is only clear cut mentioned in the will that the asset are given not to the
individual but to the HUF of the person. Innumerable judgements of the high court say that
a son is not necessary to claim status of HUF file.
Secondly, after your death or the death
of your wife the HUF will come to a close and the assets shall be inherited by the legal
heirs as per the provisions of your will . In case no will is prepared the succession will
take place as per Hindu Succession Ac
Q. Please clarify the following:
When it is obligatory upon an employee to file a tax return:
(a) Whose only source of income is salary plus bank
within exemption limit u/s 80L.
(b) Whose GTI before any deductions exceeds Rs. 1 lac
(c) Who is subject to TDS by his employer, though the
net tax payable after deductions and rebate comes to nil; and
(d) who does not fall under one out of six scheme;
If the answer is yes, please quote the section.
In case he fails to file the tax return, does he attract any penalty,
and if so how much and under what sections .The general impression I have is that an
employee whose tax is deducted at source is not required to file his return.
Ans: The filing of tax return is
compulsory when the taxable income is in excess of Rs. 50000/- per annum. Sec 139(1) is
the charging section.Non filing of tax return now attracts penalty of Rs. 5000/-.
Q. I am in recipient of prize money
after TDS @ 44% for which the TDS certificate has already been issued for the A.Y.
2001-02. As per Sec. 115BB of the I.T. act, income from prize money after deduction of
basic exemption of Rs. 5000/- for casual and nonrecurring income is taxable at a flat rate
of 40% plus surcharge.
Can I claim my refund for TDS by filing income tax
return and offering the income from the prize money along with my salary.
Ans: Under the provisions of Income
Tax Act, 1961, the income from winning from Prize money and races including horse races,
card games of any sort is taxable @ 40% plus surcharge for the Financial year 2000-01. The
tax rates have been lowered to 30% for the next year i.e. Financial year 2001-02.These
income can not be set off against any loss, neither any refund can be claimed against
Q. I am a public sector undertaking
employee and am planning to purchase a DDA flat with free hold rights. My employer will
release the loan I have applied but it will take time I have arranged money from my own
Can I purchase the flat in my wife's name immediately
who happens to be a house wife. Subsequently I intend to purchase this said flat from my
wife and get an office loan.
Will my wife /me/first seller /seller face any tax
Ans: Based on the facts of the case,
one is advised not to purchase house in the name of wife from the funds belonging to you
.If you purchase, then income arising directly or in directly from this house property
will be treated as your income. You are here by advised to purchase in your name with
arranged funds and later on avail loan from your orgnisation without any problem.
The second opinion may be that one may
loan the required amounts to ones wife and this money may be used for acquiring the
residential property. This financial transaction may bear some nominal interest.
Q. I am residing in a flat provided by
my employer in the city where my office is located. I have recently got the possession of
another flat in a co- operative housing society in the same city. The flat was build by
taking the loan from the bank. I shall be glad to know whether the property can be treated
as self occupied for claiming the interest u/s23 of Income Tax Act.
The flat in co- operative
society will be treated as your self occupied property and you would be eligible for
claiming the deduction in respect of interest on loan take by you from the bank. The
maximum interest to be allowed as deduction during the current financial year is Rs. 1.5
Q. In case one constructs a house in
one city from the loans taken from the lending financial institutions and let out this
house, the tax benefits in respected of repayment of the loan and interest are available.
Subsequently, the concerned person becomes a member of another group housing society in
the same city for acquiring a flat from the house building advance (HBA) obtained from his
Whether once the house is under possession of the
person, one may claim tax benefit on repayment of interest for the first mentioned house
as well as the later mentioned flat.
Ans: As the first house is also let out, the
interest claim shall qualify for tax deduction.
The recent house once acquired and taken
possession of, it shall be treated as the self occupied property. Hence, the interest on
the office loans shall be eligible for tax deduction.
In case one takes a loan for extension of a self
occupied residential house property, whether the interest payment shall be eligible for
Ans: The entire interest chargeable
on loan amount will be allowed as deduction while computing the Income Tax liability.
Some of us who live in DDA flat have made our
wives co- owners of the flat while converting the property to free hold. If an individual
dies intestate (i.e.without a will) does the lady become the absolute owner of the
property? There is a view that the second name is similar to the second name in a fixed
deposit will the FD amount be included in the estate?
Will the wife (the second name in the FD account) become
the absolute owner of the FD amount?
What is the distinction, if any between the second name
in the FD amount and second name in the conveyance deed, when the second name is that of
Ans: Your wife may be the co-owner
in the records of DDA, but as the property has been constructed from your funds and there
is no share from your wife financially. In such a case if the person were to die
intestate, then all the legal heirs share the property equally. It is advised that you
should prepare a will.
It may be further noted that will once
registered before the Office of the Sub Registrar shall become final and binding in law.
Q. In case when the house is ready but
not taken possession of by the owner. Can the interest be claimed as tax deduction?
Ans: Possession of the flat is
necessary for claiming the deduction for the interest payment.
Q.In case the spouse also takes a loan
for a separate residential house, whether independent tax deduction shall be available to
Ans: The Tax deduction is always
calculated separately for each individual.
Q. I am a housewife. Recently I gave
out of my house on rent. The house is my name .I am likely to earn Rs. 5000/- per month
Shall file an income tax without PAN? Can the income be
shown as income of my spouse who is already income tax payee? If so, how? Conversely, can
income from a house, which in husband name, be shown as income in the name of the wife?
Ans: In the income tax return, income from house
property is shown in the name of tax payer who is the owner of the property. Hence, if the
house wife owns the property, it would be incorrect to show such rental income in the
hands of the husband.
Secondly, you can file your income tax
return even without a permanent account number in case PAN has not been allotted to you.
If you have not applied for PAN, you should apply for it in form no.49A.
Q. My husband and I jointly own a group
housing flat in Delhi which is self occupied. The flat has been financed from a loan from
HDFC around five years ago. This loan has already been paid back and I had availed in
income tax exemption of Rs.10000/- per year availed at that time. I have come across a
rule of the registrar of Co-operative society (No. F.PA/RCS/88) dated August 3,1998 which
states that dependent children can become member of house building /housing society even
if the parents own a property in Delhi
Can we buy another property either in our name or in the
name of our major son who is currently studying and is not earning yet?
Please let me know whether I shall be entitled to tax
benefit, if I purchase another property.
Interest deduction is allowed
only for one self occupied house property. Therefore in case you buy this house for the
self occupation, the deemed annual value shall be chargeable to income tax in your name.
Secondly, if you loan the sum to your
son and this moneys so received by your son ( being a major), the property is purchased
shall be treated as his house property. One may charge some interest for such loans.
It may be noted that alternatively, this
house if bought in your name, is let out, the rental income as earned by you may be
reduced by the amount of interest payments you make for such loans.
I had constructed a single story house by raising
the HBA from the Central Govt. I now intend to construct the first floor on the same plot
by securing a housing loan from the financial institution.
Whether is may be taken to be a construction of the
house property for the purpose of claiming the interest deduction.
Ans: Based on the fact stated by
you, such extension of the existing house by constructing a floor will treated as work on
the same residential house only. As a safeguard, please make ensure that the property is
treated as one property by the house tax department for computing house tax.
Q. During the financial year 2000-01, I
purchased a residential house property by raising a housing loan from my employer. I have
claimed the tax rebate u/s 88 for repayment of installment and interest on housing loan is
also deducted from my taxable income. The bank has not financed the registration fee and
stamp duty amounting to Rs.80000/- which I have spent from my own sources.
Can I claim the tax rebate on this amount and under what
Ans: In respect of payment for
registration fee, stamp fee, etc, tax rebate u/s 88 is permissible. The maximum amount on
which rebate can be availed including the payment for purchase or construction of
residential house or payment of installment is Rs.20000/- per annum.
I am a PSU employee have taken a housing
loan of sum Rs.3 lakh on 13-6-1996 from Canfin Homes Ltd to purchase my house in
Vasundara, Ghaziabad. This property was sold to me in semi-finished condition under the
self-financed Scheme from UP Avers & Vikas Parishad. I got the possession of the
semi-finished house in Feb 1998. I could not complete the house then due to lack of
finance. On 6-1-2001,I again took a loan of Rs.1.9lakh from Canfin to complete the
construction of the same house.I am residing in the house form Nov 2000. As per the income
tax deduction calculation at source, my loss from house property has been limited to Rs.
30000 by my employer-considering only the interest for the first loan of Rs3 lakh. Kindly
tell me, if the interest for my second loan of Rs1.9lakh shall be exempted from income
The interest paid by you on the
second loan of Rs1.9 lakh would be eligible for tax deduction. Remember that the maximum
interest on loan that is allowed for loans taken after 1-4-1999 is Rs1.5 lakh. Thus, in
your case, you would be eligible for deduction of Rs30000 on account of interest for loan
taken prior to 1-4-1999 while in case of loan taken after 14-1999 the entire interest will
further be allowed in addition to the said Rs30000. However, the total deduction onaccout
of interest is limited to Rs1.5 lakh per annum.
Q: My wife and I have purchased a flat for
residential purpose jointly in March 2001. The flat is under construction and we will get
possession of the floor in 2003. We have taken a housing loan of Rs 3 lakh jointly from
ICICI Ltd. in April 2001 for the same.
Are we eligible for income tax rebate in the
financial year 2001-2002.
Ans: The deduction of interest on
loan will be available only when the flat is complete. In your case, as the construction
will not be completed during this financial year, you can not enjoy tax deduction on
account of interest or tax rebate in respect of payment of the principal amount. In the
subsequent financial year, you will be eligible for deduction both for the payment of
interest as well as tax rebate for repayment of the principal amount. You and your
wife will be eligible to claim separate deduction in respect of house rent allowance
received by both of you. It is advisable to obtain two separate receipts form the landlord
to avoid any problem at a later stage.
Q: I want to get the following clarifications on personal income
tax. I am a salaried employee and have purchased a flat and am staying there. The flat has
been jointly acquired by me and my wife. My wife, a housewife got some money from selling
some paternal property. This money was used for contributing her share in the house
property. Remaining money, I have contributed by taking a housing loan form the bank. The
property is registered in both of our names.
Can I claim rebates for interest on borrowed capital u\s 88.
Can I also pay rent to my wife (proportionate to
her contribution and proportionate to the existing market rent prevailing in the area) and
claim benefit of paying rent allowance along with the above-mentioned benefits of repaying
Ans: Yes, the rent can be paid to
your wife in proportion to her share in the ownership of the property and thus claim
benefit of tax deduction in respect of the house rent allowance received by you. As you
are under physical possession of the remaining portion of the house property, You are
entitled to get the benefit of tax rebate u\s 88 on the repayment of installment as also
deduction in respect of interest on loan.
Q: I have a DDA plot in my name. The ground floor was built in 1989
with my own savings. The first floor was built in 1997 with the saving of my wife who is
also employed. If I rent out first floor, can this rental income be shown as that of my
wife in her income tax return.
Ans: The rental income from the
first floor of the house property can not be treated as belonging to your wife. This is
because of the fact that she is not the legal owner of the land and she has only
contributed for the construction of the first floor. If possible, please sell the roof
right of the first floor to her. Then it will be possible for to show the rent received
form first floor as belonging to her. Based on the present facts, the rental income from
the first floor will be treated as your income.
My mother owned two floors in a building. In
April 1992, she filed a suit for possession and menses profit \ damages against her
tenant. She expired on 6-8-1994. I am the only legal heir. The suit has been decided in
her favour and as the legal heir I am likely to get decretal amount of Rs7 lakh now as
damages menses profits from 1-4-1989 to 10.3.1998 for unauthorized use of remises by the
tenant. The decretal amount includes Rs13,000/- as court expenses.
My mother had been filing her IT return and had executed
a separate rent agreement. She was showing her rental income from the property in her
returns. I did not file IT return of my mother after her death 1-4-1995 onward. The
property has not been mutated in her name so far. I, however, have been clubbing her
rental income of these two floors with that of my income after her death. I pay Income Tax
in the highest slabs.
Could I be informed of my tax liability, and how
can I reduce my liability?
Ans: The amount received by you on
account of mesne profits would not be liable to income tax based on the decision of the
Kerala high court in the cases of Achuthan Pillai and company vs CIT 283 ITR 458.