1,055 total views
Reverse mortgage scheme
The reverse mortgage scheme is a type of mortgage in which an owner of a residential property in Indian can borrow money against the residential property. This benefit is available for senior citizen. The senior citizen can continue to live in residential property and receive regular income.
The loan amount may be used by the senior citizen borrower for various purposes including renovation of residential property, medical exigencies, etc. However, loan amount for speculative and trading purposes is not permissible. Under the reverse mortgage, borrower will have various options to receive the loan, either lump-sum, monthly payments. The maximum period of the loan is 20 years. (The maximum period over which the payments can be made to the reverse mortgage borrower). Valuation of the residential property would be done at such frequency and intervals as decided by the reverse mortgage lender, which in any case shall be at least once every five years.
Conditions to be fulfilled for availing reverse mortgage scheme:
- The scheme is only for senior citizen i.e person above 60 years of age.
- The property should be residential only.
- There should be clear title on property
Under Section 47(xvi) of the Income Tax Act 1961
It has been provided that any transfer of capital asset in a transaction under notified reverse mortgage scheme will not be treated as transfer and will not attract any capital gain tax.
Under section 10(43) of the Income Tax Act 1961
It has been introduced to clarify that any amount of loan, received either in lump sum or instalments under a notified reverse mortgage scheme shall be treated as exempt from income tax.
The loan amount can either be repaid by the borrower, his/her legal heirs.
If the amount paid the legal heirs to clear the mortgage on property than amount can be availed. As cost of acquisition as per Supreme Court judgement in RM. ARUNACHALAM v CIT (SC)
[button color=”” size=”” type=”round” target=”” link=”https://thetaxtalk.com/”]home[/button] [button color=”” size=”” type=”round” target=”” link=”https://thetaxtalk.com/submit-article-publish-your-articles-here/”]Submit Article [/button] [button color=”” size=”” type=”round” target=”” link=”https://thetaxtalk.com/discussion-on-tax-problem/”]Ask Question [/button]