Reader's corner: Can you invest over Rs 150,000 in PPF in a financial year?

During this financial year, I paid only interest on my home loan for nine months as the property was under construction. I got possession in January. That's when the full home loan repayment - principal plus interest - started. Will I be able to claim the entire interest portion under Section 24?

Yes, you can claim deduction on the entire interest payment you have made this year under Section 24, subject to maximum prescribed limits. For the interest that you paid from the date of taking the loan to the end of the financial year immediately preceding the financial year in which the property got constructed, you can claim a deduction under Section 24 under 'pre-construction interest'. This can be claimed over a period of five years in equal instalments starting from the year when the property was fully constructed. However, the total deduction under Section 24 for a particular tax year (current year interest plus one-fifth of pre-construction interest) cannot exceed Rs 200,000 per year. As for the principal repaid, you can also claim deduction under Section 80C, subject to a maximum amount of Rs 1.5 lakh a year. 

Can I invest more than Rs 1.5 lakh in public provident fund (PPF) in a financial year? Will my entire investment earn interest?

The annual investment in PPF account is capped at Rs 1.5 lakh for each financial year. The amount deposited qualifies for deduction under Section 80C, within the overall limit of Rs 1.5 lakh. You may consider giving a gift to your wife and children, who in turn can deposit the money in their PPF accounts. Although this will attract clubbing provisions and the interest from those accounts will get added your income, it will not be taxable in your hands as interest from PPF is not taxable.

I understand I can claim Section 80C and other tax-saving deductions when filing returns. Do I also need to submit proof to the Income-Tax (I-T) Department for these investments when filing returns?

Thanks to e-filing and other technology initiatives taken by the government, no documents are required to be filed or attached along with the return. This applies even to those who file manual returns. Super senior citizens and individuals filing ITR-1 with income not exceeding Rs 5 lakh with no refund claim have the option to file returns manually. Nevertheless, you should preserve the supporting documents as they can be asked for if your return gets selected for scrutiny. Keep these records for at least six years.   

If I have paid stamp duty and registration fee for the purchase of a residential property, can I claim this amount under Section 80C of the Income-Tax Act? I have bought an under-construction house this year. I will receive possession in 2023.

Yes, the stamp duty and registration charges paid by you for the purchase of a residential house property can be claimed as deduction under Section 80C, subject to a maximum amount of Rs 1.5 lakh a year in a financial year. However, for the under-construction house, you will not be able to claim Section 80C deduction till the house is fully constructed. Thus, no deduction will be allowed for the charges you paid before the property got constructed. You should also take care that the property should not be sold before the expiry of five years from the date it got constructed, otherwise any deduction claimed under Section 80C will be reversed and added to your taxable income. 

How is dividend from debt mutual funds taxed?

Dividend from debt mutual funds is exempt in the hands of recipients under Section 10 (35) of the Income-Tax Act. However, this has to be reported under the section 'exempt income' in the return form.
The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in