A couple of months ago, I sold a plot of land and used the proceeds for renovating my house. Can I claim capital gain exemption under Section 54F?
— Anurag Kumar
Section 54F of the Income-Tax Act, 1961, provides exemption on capital gains on sale of any capital asset if a taxpayer constructs or purchases a residential house (new asset) within the prescribed period. The objective of this section is to exempt the capital gain on sale of any capital asset, provided a new house is purchased/constructed. A new house can neither be an extension nor an addition made to an existing structure. Thus, in your case, capital gains exemption won’t be available.
I am an NRI based in Dubai. Recently, I sold some units of debt-oriented mutual funds and earned capital gain. Will such capital gains be taxable in India?
— Ramesh Ojha
Under the Income-Tax Act, capital gains on transfer of debt-oriented mutual funds are taxable. However, as you are a tax resident of UAE, you can claim relief available under the India-UAE tax treaty, subject to certain conditions. Article 13 of the treaty deals with taxability of capital gains arising on transfer of different types of assets. As per Article 13(4), gains arising from the sale of shares in a company, which is a resident of India, can be taxed in India.
However, units of mutual funds cannot be considered as shares of a company. Further, the I-T Act has given different treatment to shares and units of mutual funds. Therefore, the capital gain arising from sale of units of MFs will not be taxable in India as per Article 13(5) of the treaty. The relief under the treaty can be availed only on furnishing of a Tax Residency Certificate (TRC) and certain additional information in Form 10F.
I took a home loan for buying a flat about five years ago. Since then, I have been claiming deduction on loan repayment (interest and principal) in ITR. This year, besides interest, I have paid certain amount as pre-payment charges for closure of my home loan account. Will I be eligible to claim deduction on that?
— Purav Gupta
As pre-payment charges have direct linkage with the obtaining of a loan that was availed for acquisition of the property, you can claim the deduction on the amount paid for prepayment under Section 24(b) while computing the income under the head “income from house property’’.