As the property is self-occupied, the annual value would be taken as nil and, therefore, the entire interest subject to the above referred ceiling limits will be a loss under the head `Income from House Property'.

It is presumed that this is the only house property owned by the reader.

Further, if the reader is now entitled to get his HRA from the employer, the same will be fully taxed, as there is no rent paid.

In the second alternative, if the new house is let out, the rental income will be taken as the annual value (assuming that this is the fair rent) and the entire interest on the housing loan can be claimed as a deduction against such annual value without any ceiling limit.

The perquisite in respect of the rent-free accommodation provided by the employer will be as follows:

If the accommodation provided to the employee is owned by the employer, then 10 per cent of the salary will be taken as the value of perquisite.

If the accommodation provided by the employer is taken on lease or rent by the employer, the value of perquisite shall be the actual amount of lease rental paid or payable by the employer or 10 per cent of the salary, whichever is lower.

Query

My wife and I bought a flat in Chennai in January 2000 in our joint names.

Each of us own 50 per cent of the undivided share in the flat. The source for purchase of the flat was as follows:

Neither my wife nor I have any other house property and the said flat is self-occupied. My wife has been claiming the interest on the house-building advance as a deduction in computing the income from house property, and has also been claiming rebate in respect of the principal repayment of the advance.

She has now resigned her job. I, therefore, wish to take over the liability to repay the housing loan.

If I do so, will I be able to use the tax benefits for interest and principal repayments?

In the alternative, would it be required that I take a fresh loan in my name?

S. Sudharsanam

Reply

The reader's query states that the house-building advance has been taken from the employer of his wife.

Now that the wife has left the job, one fails to understand how the advance can remain with the employer in the name of the reader's wife.

In any event, going by the premise that this is the actual situation, the reply is as follows:

With reference to the interest being claimed as a deduction, what is required is that the construction of the property should be with borrowed capital.

The borrowal in the name of the reader may not be required.

The fact that the interest is paid by the reader should suffice for the claim of deduction in respect of interest in computing income from house property.

With reference to the principal repayment, the rebate under Section 88 can be claimed only by the person who borrows the money.

Therefore, in the instant case, the reader would not be entitled to rebate in respect of the principal repayment of the housing loan.

Where the reader takes a fresh loan, the interest can be claimed as a deduction in computing the income from house property. Rebate under Section 88 can also be claimed, provided the loan is taken from a company or institution referred to in Section 88(2)(xv)(c).

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