“HOUSING LOAN DEDUCTION ADMISSIBLE EVEN IF THE HOUSE IS LYING VACANT”

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Query 1]

 

I have taken home loan of 25,00,000/- in the year 2011 for residential flat at Thane. And got it’s possession in the same year. I am paying EMI every year of Rs. 2,75,652/-. Out of this, for the current year principal component is Rs. 10,923/- and interest component is Rs. 2,64,729/-. Also, I am paying Rs. 36,000/- per year towards LIC policy.  I am currently post at Nagpur and stays with my family. My gross salary for the financial year 2013-14 is Rs. 6,75,634/- At thane home, no one is staying & it is vacant. Kindly tell me whether I will be able to get the deduction towards home loan EMI and LIC policy saving in the financial year 2013-14? [Amol Sherkhane-sherkhane.a191@gmail.com]

Opinion:

It appears that you own a single house property at Thane only. You can claim deduction u/s 80C of Rs. 10,923/-towards the principal repayment of housing loan and also of Rs. 36,000/- towards the payment of LIC. Further, you can get deduction towards Interest on Housing loan of Rs. 1.50 Lacs (Even though, the interest pay is Rs. 2.64 Lacs, the maximum ceiling towards interest in such case is restrict to Rs. 1.50 Lacs.). The deduction is admissible even if the house is lying vacant.

 

Query 2]

I have purchased a flat in one housing society in 1998 by making full payment of Rs.  2,72,000/-. However the process of sale deed by the company could not be completed because of the mismanagement of the company. A civil appeal came to be filed before Hon’ble supreme court and Hon court ordered to seize all its activities and functions of the company. Due to this, even after making all payments, my sale deed was not executed. I was having possession of the flat and unregistered agreement to sale.  

I sold this property to another person. Since first sale deed was not execute, second sale deed between me and third party was also not execute. We also made an unregistered agreement that as when housing company execute the sale deed, I in turn would execute sale deed in the name of third party. I have handed over possession of the flat to him at that time only as I have also received amount which I have paid to the company from that person.

Now, in Feb-2013, as per order of Hon Supreme Court, sale deed between housing co. and me is executed. In the sale deed, sale consideration amount was shown as Rs. 2,72,000/- but market value and stamp duties are charged as per market price of Rs. 17,00,000/-. Now, the flat is on my name in all civic records. The third party wants me to execute sale deed in favor of some other party for Rs. 21,00,000/-. My question is what will be my tax liability towards capital gain tax? It may be noted that actually I am not getting any money but technically on paper amount will be received by me. I am already in 30% slab of income tax. [Abhay Narale-a.narale@yahoo.com]

Opinion:

  1. Sale deed is not the only documents to determine the taxability/ownership under the Income Tax Act-1961. In your specific case, you have become the owner of the property in the year 1998 itself when you have taken the possession of the property & paid the purchase price.
  2. As far as Income Tax Act-1961 is concerned, you have purchased as well sold the flat in earlier years on the basis of agreement to sale itself. In general & in normal course, possession is considered as transfer under the Income Tax law.
  3. You have sold the property by executing the agreement to sale and handing over the possession of the property. The date/ year of sale as well as the amount of sale / stamp duty valuation, at the time of sale, is not mention in the query. Legally speaking, the capital gain would have been taxable in the year in which the possession was handed over & amount was received by you. If you have offered the capital gain for taxation at the time of executing unregistered agreement to sale and handing over the possession of the property, nothing would be taxable in your hands in the current year provided that while executing the sale deed, the details background, facts & figures are incorporated & the person to whom you have sold the property through earlier agreement & possession becomes consenter and confirms his liability on the capital gain arising out of the present sale deed transaction.
  4. If you have not shown/offered the capital gain earlier in the year of handing over the possession (and execution of unregistered agreement to sale) as mentioned above, then the tax implications would differ. In such case, your documentations & drafting would play a vital role in determining the taxability of the transaction. You are advise to approach your tax consultant with all the relevant papers before executing the sale deed.

Query 3]

The price of semi finished flat was Rs. 15,82,710/- & final price of finished flat was Rs. 22,73,060/-, the details of which is as given below:

  1. Flat price-Rs.20,22,150.00
  2. Parking-Rs.45,000.00
  3. Electricity-Rs.35,000.00
  4. Capital Fund-Rs.10,000.00
  5. Maintenance-Rs.9600.00
  6. Registry expenses – Rs.1,51,310.00 (Actual amount of stamp duty – Rs. 1,37,310.00)

 

The details of the payment was make through cheque was as follows

  1. 11/10/2008-Rs.1,78,000.00 by me by cheque
  2. 11/10/2008-Rs.1,40,000.00 by me by cheque
  3. 23/10/2008-Rs.14,50,000.00 by HDFC by cheque
  4. 08/11/2008-Rs.2,00,000.00 by me by cheque
  5. 08/11/2008-Rs.1,40,00,00 by me by cheque
  6. 08/11/2008-Rs.1,40,00,00 by me by cheque
  7. 25,060.00 by me by cash

In the sale deed, following clause was add “WHEREOF completion shall be do wholly at the part of vendor for which a separate agreement would be execute” but later no such Agreement was sign by the Builder. Under such a situation, what will be the Capital Gain? While filing IT Return, I can only submit the copy of  SALE DEED dated 20/10/2008  and the copy of SALE DEED entered on 13th January 2014 but not the aforesaid Agreement?  Please advice. [bltiwari@gmail.com]

Opinion:

  1. It appears that
    a] you have purchased the semi furnished flat in 2008 with above clause incorporated in the sale deed & have sold the said flat in 2014
    b] The flat is costing you Rs. 22.73 Lacs and the entire payment of Rs. 22.73 Lacs towards purchase, furnishing & amenities of the flat is appropriately documented at your end.
    c] For some technical reasons, the sale deed has incorporated the clause about separate agreement for finishing of the flat as per your requirements & specifications.
  2. Even if no such separate agreement is execute at a later date, the cost of acquisition could still be considere at Rs. 22.73 Lacs as payments done by you & other documents would be justifying it.
  3. There is no requirement to submit the copy of the sale deed along with return of income as such. However, your income tax Assessing officer MAY demand it at a subsequent date, if required. The non availability or non execution of separate agreement as mentioned above in the sale deed would not affect your claim provided so long as you have alternate documents/vouchers/ records to justify your cost at Rs. 22.73 Lacs. The payment done by cheque would be an added advantage in justifying the cost at Rs. 22.73 Lacs.

 

Query 4]

Is there more tax benefit is available if I purchase a flat or independent house before 31.03.2014? Please elaborate along with relevant sections and other stipulations for claiming the tax benefit. [L.K. Viswani, Bhopal]

Opinion:

  1. Yes, additional tax benefit is available U/s 80EE ONLY IF a new house is purchase by the taxpayer during the FY 2013-14.
  2. An additional deduction towards interest on housing loan u/s 80EE is available to an individual assessee who has taken a loan from a bank or a housing finance company during the financial year 2013-14.
  3. 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.
  4. If all above conditions are satisfies, interest up to a maximum of Rs. 1 Lacs shall be deductible u/s 80EE. However, if interest is allow 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.
  5. 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.

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