What is the maximum income tax exemption available in a joint home loan? Will it be split equally between the joint borrowers?
The Income Tax Act, provides deduction in relation to interest as well repayment of principal amount of loan to the owners of the property. Under Section 24 of the Act, interest on a home loan taken for the purpose of purchase or construction of house property is allowed as deduction without any limit in case of let out property. However, interest deduction is restricted to Rs 2 lakh in a self-occupied property but the said property should have been acquired or constructed within five years from the end of the financial year in which the loan is taken. Else, deduction will get restricted to Rs 30,000. Further, any principal repayment of housing loan is eligible for deduction under section 80C within the overall limit of Rs 1.5 lakh. First-time home buyers are also eligible for an additional deduction under Section 80EE up to maximum of Rs 50,000 in respect of interest on loan taken for purchase of a residential house property, subject to certain conditions.
In a joint loan, both individuals can claim deduction individually, subject to above limits provided both borrowed and contributed to the acquisition of the property and are repaying the installments. Where the house is in joint name for example, husband and wife and husband borrowed the money and repaying the loan, only husband is entitled to claim deductions. Further, by virtue of clubbing provisions, where such house is let out, the rent even though received by wife, would get clubbed as income of husband. However, where the joint holder is say father or mother, clubbing provisions do not apply and their share of rent would be taxable in the hands of mother or father only. While determining the tax ability of income in the case of joint holders it is also important to analyse the understanding/ agreement between the owners particularly where purchase is funded by only one of them.
If I withdraw from my Employees’ Provident Fund (EPF) for down payment on my house, will I have to pay tax on it?
EPF does not allow withdrawal during the service period for buying/construction of a house but grants a non-refundable advance for such purposes. Such advances are not taxable in the hands of employees. But, you will need to check whether you are eligible to take such an advance, as this is dependent on several factors, such as the EPF rules in relation to the duration of your membership of EPF, the amount of accumulated contribution in your account, etc.
If I open a Public Provident Fund (PPF) account in my daughter’s name, can I claim tax exemption on the investments in that account, along with mine? I don’t have EPF, since I am self-employed.
You already have a PPF account in your name, whereby you are contributing and maybe claiming tax deduction under Section 80C for the contributions made. The maximum deduction limit under Section 80C is Rs 1.5 lakh and if you have not already exhausted this limit from contributing to your PPF account, along with other eligible investments, further deduction would be available in respect of contribution to PPF to your daughter’s account, subject to overall limit of Rs 1.5 lakh. You may still consider opening the PPF account in the name of your daughter, as interest earned on PPF account is tax-exempt and it is one of the popular modes to save money for the future of children.
The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in
