T. Banusekar

I RECENTLY got a job in a software company in Bangalore. My parents took a housing loan from State Bank of India and constructed a house in Andhra Pradesh. This house is occupied by my parents.

The loan was taken in my mother's name. As my parents, at present, have no income, they are not in a position to pay the equated monthly instalment (EMI) to the bank. I am paying the EMI out of my salary.

Will I be eligible to claim the tax benefits even though the loan is in my mother's name or should I have the loan transferred in my name? Also, can I claim exemption under Section 10(13A) in respect of house rent allowance (HRA) even though I stay in my brother's house for which I pay no rent?

Rakesh Kumar

Reply

The tax benefit under Section 24 — in respect of the interest payment on housing loan) — and Section 80C — on the principal repayment of housing loan — can only be claimed by the owner of the property. In your case, it appears that your mother is the owner of the property and, therefore, the question of your claiming deduction either Section 24 or Section 80C will not arise. This will be the position even if you have the loan account transferred to your name.

The exemption under Section 10(13A) cannot be claimed, since there is no rent paid by you. The exemption under this section will be the least of the following:

excess of rent paid over 10 per cent of salary due for the relevant period; or

if the accommodation is in Mumbai, Kolkata, Delhi and Chennai — 50 per cent of salary — and in any other places — 40 per cent of salary; or

actual allowance received.

In your case, the exemption cannot be claimed since the least of the above will be nil as no rent is paid by you. This will be true even if you are in receipt of HRA.

Query

What will be the tax liability in respect of a house which is owned by me but let on lease to my employer who permits me to use it during my employment?

Sajeev

Reply

As the property owned by you is let on lease to your employer, the annual value of the property will be charged to tax under the head `income from house property' subject to the deductions available in computing the same.

Further, since your employer has given you a rent-free accommodation for use, a perquisite value will be treated as your salary and will be taxed under the head `salaries'. The value of perquisite will have to be determined in accordance with Rule 3 of the Income-Tax Rules.

Query

My wife and I propose to purchase a house property in our joint names. If we raise a loan jointly, can each of us claim deduction under Section 24 on the interest and under Section 80C in respect of the principal repayment to the extent of half each.

Ashish Kumar, Vittaldas Shenoy

Reply

If the two of you are the joint owners of the property to the extent of half each, it would be possible that the deductions under Sections 24 and 80C can be claimed to the extent of half by each of you.

The deduction can be claimed in the proportion in which you and your wife are the owners of the property.

Query

If I gift shares and bonds to my daughter's children and if the value of these exceed Rs 25,000, will the same be taxable in their hands? What documentary evidence is required to satisfy the tax authorities about the genuineness of the gift?

Srivatsan A.

Reply

There will be no tax implications in the hands of the donees.

First, what is sought to be taxed as `income from other sources' in the hands of a donee is only a gift, which is in the form of money.

Any gift other than in the form of money — shares, bonds, and so on — will not be taxed in the hands of the donee.

In any case, gift from a relative will not be charged to tax in the hands of the donee. The term relative also includes the grandfather of an individual.

A gift is also a contract, but without consideration in money or monies worth. A gift is valid so long as there is an offer and acceptance; these may even be made orally.

However if you think it necessary, a formal letter may be written to the donee who can convey his acceptance of the gift to you. This documentary evidence would suffice to prove the genuineness of the gift.

Also, shares and bonds may have to be transferred in the names of the donees in accordance with the respective laws and rules governing them.

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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