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Taxation: Homi Mistry

Business Standard 

My wife and I both work for Indian Bank and jointly own a flat in Kochi. We took a loan to buy the flat in my wife’s name. I had guaranteed the loan. Repayment of the loan is made by both of us, out of our respective savings accounts. Will you please clarify if my contribution towards this qualifies for deduction under Section 80C? The loan availed by my wife, a clerk in the bank, earns simple interest repayable only after liquidation of the principle. Will the accrued interest qualify for deduction from the taxable income? Will I also benefit for deduction of interest expenditure on the housing loan to the extent of 50 per cent?
Although you are a joint owner of the flat, you have not borrowed the funds. As the entire loan is in your wife’s name, you cannot claim deduction under section 80C(2)(xviii) for contribution made for repayment of housing loan, as well as for interest paid on such housing loan. Your wife can claim deduction for accrued interest on housing loan in the year of accrual, subject’ to a maximum limit of Rs 150,000, assuming the property is not let out and the loan is for the house acquired/constructed on or after April 1, 1999 and such acquisition/construction was completed within three years, from the end of the financial year in which the loan was taken.

I am invested in the dividend payout option of a mutual fund scheme. I want to shift to the growth option. Will there be a incidence?
Yes, switching over is regarded as transfer and hence, the same will be subject to capital gain

I am 67 years old. Due to cash crunch, I am planning to put my house on a reverse mortgage scheme. How will my liability be calculated?
In reverse mortgage, you pledge the residential property owned by you (with no existing loan due against it) and opt for a monthly, quarterly, annual or lump sum payments, at your discretion. This amount received through reverse mortgage is considered a loan and not income /capital gain from transfer of property. Hence, this will not attract any tax liability, provided the transaction of reverse mortgage is made as in the scheme and notified by the central government. Capital gains tax liability will arise only at the time of selling such house property and not at the time of availing the loan.

Request you to kindly explain when one can claim up to Rs 1.50 lakh as deduction for interest repayment for a housing loan and when can he /she claim up to only Rs 30,000.

In case of self-occupied house property, the deduction for interest on borrowed capital is restricted to Rs 30,000. However, if the house property is acquired/constructed on or after April 1, 1999 and such acquisition/construction is completed within three years from the end of the financial year in which capital was borrowed, then deduction for interest on borrowed capital is restricted to Rs 1,50,000.

The writer is a tax partner at Deloitte, Haskins & Sells. The views expressed are his own.

First Published: Fri, March 09 2012. 00:21 IST
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