Just read your views in The Financial Express Q&A that charges paid on registration of house can be claimed under 80C. Thanks. I did not know this.
Section XVI of 80C states that ” any payment made by individual for purchase or construction of a residential house property, the income from which is chargeable to tax under Income from house property” is also exempt from tax under 80C.
Does that mean if I spend Rs.10 lakh from my pocket (and not repaying a house loan) for constructing or purchasing a residential house /flat, then from Rs.1 lakh (being the upper limit of 80C) is exempted under 80C? What happens in case of joint ownership – would both the joint owners get an exemption of Rs.1 lakh each? What happens to the balance Rs.9 lakh? Can I get exemption from that too in the future years?
Up till now, I was under the impression that only housing loan repayments are governed under 80C and one had to compulsorily take a housing loan to get 80C benefits.
Can a HUF get similar exemption for paying the amount for a house owned by the individual, the individual being karta of the HUF?
Please clarify.
?Rakesh Samar
Deduction under Sec. 80C (2)(xviii) is available up to a maximum limit of Rs. 1 lakh, to an individual and an HUF, not for a purchase or construction of a residential house but for repayment of amounts borrowed for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head Income from house property (or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head). We request you to go through the entire section and all its subsections for clarity on the matter.
I have a PPF account, which is maturing in March 2010. My queries are :
a) Would the maturity amount be subject to income tax levy?
b) Where and in which scheme can I reinvest the maturity amount of the PPF for a short period (ranging from 4 months to an year) so that it comes handy without tax implications at the time of my soon to be marriage?
?Rakesh
1. The maturity amount of PPF is not subject to tax.
2. The best way of handling your problem is to opt for post-maturity extension of the account without contribution. From such an account, withdrawals can be effected in one or more installments, not exceeding one in a year. The balance will continue to earn interest till it is completely withdrawn. Else you may invest the funds in a liquid fund of a mutual fund.
Kindly advise me to whether up to Rs.1,00,000 deposited by a senior citizen in the Post Office Senior Citizen Saving Scheme (SCSS), in a year is eligible for income tax exemption u/s. 80C.
?S. L. Mahajan
Yes, it is. The benefit of Sec. 80C has been extended to investments in SCSS with effect from April 1, 2007.
My wife along with three sisters inherited the family residential house as per will of their mother. The house was constructed before April 1, 1981 & the cost of property as on April 1, 1981 was Rs. 27 lakh as per the valuer. The sisters got the house vacated from tenants & got it free hold in FY 09-10. They also sold the house in financial year 2009-10 for Rs.2 crore. They have incurred the following expenses
1. Conversion charges to make house freehold ? Rs. 5 lakh
2. Lawyer fees ? Rs. 4 lakh
3. Brokerage ? Rs. 10 lakh
4. Evicting occupants – Rs. 6 lakh
5. Interest on loan taken for above – Rs. 50 lakh
Can these expenses be claimed while calculating capital gain? What is the position of capital gain tax, is it short term or long term? How much will be capital gain?
?B. Mathur
1. All the expenses incurred by your sisters were to render the house in saleable condition. Therefore, these expenses are deductible from the sale proceeds. However, the interest of Rs. 50 lakh on the loan for doing the above 1 to 4 items seems extraordinarily high. The total cost of this is only 25 lakh and therefore this high an interest amount does not seem justified.
2. For computing long-term capital gains arising out of the subsequent sale by the donee or the legatee, the cost of the property is the cost incurred by the donor when he originally acquired it, or if the property was acquired by the donor prior to 1.4.81, the Fair Market Value as on 1.4.81 as assessed by an official chartered valuer, whichever is higher. Explanation ?iii? to Sec. 48, defines ?indexed cost of acquisition to mean an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later?.
This means that in the case of an inherited or gifted property, the cost of acquisition is the cost to the original holder (or FMV as on 1.4.81) but the date of acquisition for indexing should be taken as the date of the inheritance or the gift. However, the character of long or short-term depends upon the date of acquisition of the original holder. In case this original holder has also acquired the property by way of gift or inheritance then it will be the date of very first holder who purchased or constructed the property.
This may end up in some strange results. For instance, if and when you sell the property, it will be treated as sale of a long-term capital asset, irrespective of your holding period but the ratio for computation of indexed cost will be the CII of FY in which you have sold the property and the FY in which you became its owner.
The authors may be contacted at wonderlandconsultants@yahoo.com
