Query 1]

I have taken Housing Loan of Rs. 24 Lacs in July 2013 and tentative amount of interest to be paid during FY 2013-14 shall be around Rs.1,08,000/-. The possession shall be handed over to me by the end of March-2014. Further conditions of section 80EE are also satisfied as I have taken the House for the 1^st time and loan is below Rs. 25 Lacs. I want clarification about:

1. Whether I can get deduction of Rs. 1,08,000/- under other source of Interest on loan and Rs. 1,00,000/- under newly inserted section 80EE?
2. Since the possession is by March-2014, can I get HRA exemption for full year in FY 2013-14 or from April 14 to July 13 only? [mgdaga@gmail.com]

Opinion:

It’s important for the taxpayers to understand the benefit conferred by newly inserted Section 80EE. An additional deduction towards interest on housing loan is available u/s 80EE to an individual assessee who has taken a loan from a bank or a housing finance company during the financial year 2013-14. This deduction is admissible only if the:
a] value of residential house property doesn’t exceed Rs. 40 Lacs
b] loan sanctioned doesn’t exceed Rs. 25 Lacs.

c] Taxpayer doesn’t own any other residential house property on the date of sanction of loan.

If all above conditions are satisfied, interest up to a maximum of Rs. 1 Lacs shall be deductible u/s 80EE. However, if interest is allowed as deduction u/s 80EE, the same interest shall not be deductible under any other provision of the Act for the same or any other assessment year.

For all the taxpayers who are intending to purchase a house property can purchase it before 31.03.2014 so as to have an additional deduction u/s 80EE towards Interest on housing loan.

In your specific case,

1. You can not claim deduction twice for the same interest payment. Once you claim deduction u/s 24(b) of the Income Tax Act-1961 towards interest on borrowed capital, same amount would not again be deductible u/s 80EE.

2. You can get the House Rent Allowance (HRA) exemption for the entire financial year 2013-14.

Query 2]

I had purchased a flat under construction in apartment at Noida, (UP) in my name and the name of my wife Sharddha is incorporated as a co-owner in F.Y.2009-10. 95% of the payment was already made to the builder as under:

Basic cost	42,12,000/-
Additional item cost parking, power bag, Fire, IFMS charges and other etc.	6,71,600/-
Total         Rs…	48,83,600/-

 

I have recently sold this flat on 10^th October 2013 (received a sum of Rs. 60,79,200/-) and I have paid transfer fees to builder Rs. 2,23,467/-. I want to find out the capital gains (as per Income Tax laws) on this apartment. I had taken almost all money in my account (and not in Shraddha’s account). All the documents, including the copy of agreement to sale, payment dates, transfer fee paid, amount received on sale is completed from my side. I have following queries:

1. Accepting the money in my account will this impact the capital gain?
2. What is shraddha’s liability?
3. Also, what avenues do I have for investing so that I am not liable to pay capital gains tax? [Ankush-info@vinfrangp.com]

Opinion:

bestow

 

1. Before the question is answered, the important issue which needs to be ascertained is whether you have become the owner of the property or not. Payment of 95% of the purchase price may not be synonymous with the ownership under the Income Tax Act-1961. The clauses incorporated in the agreement to sale would determine whether the ownership of the flat was there or not. If possession is handed over to you, in normal course, it could be presumed that the ownership is bestowed. The issue is important to ascertain whether you are transferring “Right” in a flat or a “Flat” itself. If you are transferring a flat, then the tax would be payable on the basis of stamp duty valuation if it is higher than the actual sale consideration. Further, tax saving mechanism also differs on transfer of “Right” vis a vis “Flat”.
2. Your holding period is of more than 36 months, you would be entitled to indexation benefit and the gain would be taxable as Long Term Capital Gain (LTCG).
3. The mere fact of you having solely received the entire amount against sale of flat is not the only factor to determine the taxability in your hands alone. In your specific case, it appears that the name of your wife is incorporated in the sale deed for the name sake only & nothing is paid by her towards the purchase price. If it is so, the capital gain arising on transfer of the property would be taxable in your hands alone.
4. The amount of transfer fees of Rs. 2,23,467/-will be deductible from the amount of sale consideration.

With above background, the point wise replies to your queries are as under:

1. Accepting the amount in any single account doesn’t affect the tax liability. The capital gain amount would not vary by the fact that the amount is accepted in one account alone.
2. If her name is incorporated at the time of purchase for the name sake only & nothing is paid by her towards purchase price of the flat, nothing would be taxable in her hands. However, if she has an ownership stake in the flat then her share of capital gain would be taxable in her hands only. If there is nothing contrary to prove anything otherwise, joint owners, in routine course, are presumed to have equal ownership in the property.

3. Taxability of LTCG & Exemption:

   After taking the indexation benefit, the amount LTCG would be computed. LTCG is taxable @ 20% u/s 112 of the Income Tax Act-1961. LTCG arising on transfer of a residential house property can be save by claiming an exemption u/s 54 or U/s 54EC, as under: –

   i) Exemption Under Section 54:
   For claiming an exemption, taxpayer has to invest the amount of LTCG for purchase of another house property within a period of 2 years. ( for construction- 3 years period is permissible) From the date of transfer of the house. In case the amount is not utilized as aforesaid for purchase/ construction before the due date of filing the return of income of the financial year in which transfer take place, the amount is require to be keet in a “Capital Gain Deposit Account Scheme” with a schedule bank.
   ii) Exemption Under Section 54EC:

   For claiming an exemption, taxpayer has to invest the amount of LTCG. In Specified bonds issued by the Rural Electrical Corporation (REC). Or National Highway Authority of India (NHAI) within a period of 6 months from the date of transfer.

   If you have transferred “Right” in a flat, you can claim either an exemption u/s 54EC as mentioned above or can claim an exemption u/s 54F by investing the amount of net sale consideration for purchase/construction of a residential house property within a prescribed time frame mentioned in 3(i) above.