The Hindu Business Line : Can tax benefit be claimed on the entire EMI when house is jointly owned?

I HAVE taken a housing loan to purchase an apartment. The loan is in my name and I am paying the EMI . The property is, however, in the name of my wife and me. My wife does not have any income.

Can I claim tax benefit in respect of the entire interest and principal? Is there any tax benefit in respect of the stamp duty paid?

Lalit

Reply

You can claim the entire tax benefit in respect of the principal and interest payment. Stamp duty can be claimed as a deduction under Section 80C.

Query

I gave my wife a sum of Rs 3 lakh in May 2004. She has been using the money to buy and sell shares and has earned an income of Rs 50,000.

What will be the tax implication in respect of the income earned in the last year and in the current?

Ajoyendu Das

Reply

If the gain is long-term and assessable under the head capital gains and is earned through trading in a recognised stock exchange on or after October 1, 2004, the same will be exempt.

However, if the gain is short-term or if it is assessable as business income or if it is not a transaction on which securities transaction tax has been suffered on sale, the gain will be taxable.

Since you gave your wife the funds for investment, you will attract the clubbing provisions in Section 64(1) and, therefore, the gain will be assessable in your hands. This will be the position both for the last year and the current year.

Query

I am a government employee. My mother owns a plot of land on which we have constructed a house. This house was constructed with the help of a loan taken from the LIC housing finance for which my mother was the first applicant and I, the co-applicant.

I paid the EMI out of my salary. Can I get the tax benefits in respect of the EMI? What will be the position if the property is let out by my mother and the rent retained by her? My mother is 65 years and not working.

Manoj

Reply

Between the two of you, you will have to decide who the owner of the house is. The land, as stated by you, belongs to your mother. The house, however, can be owned by either of you. If the house is owned by your mother, you will not get any tax benefit in respect of the EMI you paid. If, on the other hand, you are the owner, you will be able to get the deduction in respect of the interest in computing the income from the house property and also the deduction under Section 80C in respect of the principal repayment of the housing loan. You may note that in such a case the rent in respect of the building should belong to you and be treated as your income and not that of your mother.

Query

My wife and me are both employed. We had availed of a housing loan — my wife being the first applicant and I, the second. Until recently we were staying in this house. My wife and I claimed tax benefits in respect of the principal and interest payment equally. Last year I had to move to a different town due to work commitments. My wife continues to live in the same house. I now live in a rented house.

Can we continue to claim the tax benefits in respect of the principaland the interest payment equally? If I were to purchase another house, will I get the tax benefits in respect of the EMI paid on the new housing loan? Presently I have taken a housing loan and I have been allotted a house, but since the basic amenities such as water, sewage and electricity connection are not available I have not taken possession of this house.

This house is located in the town where I stay. Will I be able to get the tax benefits in respect of the EMI paid by me?

Rajesh

Reply

You can continue to claim the tax benefit in respect of the principal repayment of the housing loan and the interest on such loan taken for buying the house in which your wife is now staying if you are a joint owner of the house.

In respect of the new house, apparently the house is not complete, in the sense that certain basic amenities have not yet been provided. In this case you can claim the deduction in respect of the principal repayment under Section 80C in the current year.

In so far as the interest payment is concerned on this new loan, you will be able to claim the deduction in computing income from house property in the current year if the house is completed within this year.

Otherwise, the interest of the current year can be claimed in five equal annual instalments beginning from the year in which the construction is complete.

You may also note that you can only treat one of the houses as self-occupied. The other will have to be treated as a deemed let out property and the notional income from the property will have to be offered to tax.

You can choose which of the houses is to be treated as self-occupied and which one as a deemed let out property.

(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.)

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