T. Banusekar

I SOLD a piece of agricultural land in the financial year 2004-05. This land was acquired by me more than three years ago. Will long-term capital gains be payable on the sale?

Tarun

Reply

Capital gains will not arise if the agricultural land is in India and is situated outside specified area, not being land situated within the specified limits. Specified area means any area within the jurisdiction of a municipality or cantonment board and which has a population of less than 10000 as per the last preceding Census of which the relevant figures have been published before the 1st day of April of the previous year or includes any area within a distance of 8 km from the limits of such municipality or cantonment board and notified by the Central Government in the Official Gazette. If this condition is not satisfied, the sale of the land even though used for agricultural purposes will be chargeable to tax under the head `capital gains'. It will make no difference whether the gain is long or short term and the charge or exclusion therefrom will take place irrespective of this factor.

Query

I want to renovate my home. My father owns the house. If I take a loan for renovation and pay the EMI out of my income, will I be eligible for the tax benefits?

V. Seshadri

Reply

The tax benefits available under Section 80C in respect of the principal repayment of the housing loan and under Section 24 in respect of the interest on the housing loan cannot be claimed by you. It is only the owner of the property who can claim these benefits. Since you are not the owner, you cannot get these benefits. Your father will not be able to get the benefits since he is not taking the loan and paying the EMI.

Query

I purchased a house and for this purpose took a loan from the bank. . I have let out this house and I live in a rented house. Will I be able to claim the tax benefits in respect of the EMI on the housing loan taken for purchase of the property? If so, what will be the limit up to which I can claim the benefits?

S. Mukherjee

Reply

You can claim tax benefits under Section 80C in respect of the principal repayment and under Section 24 in respect of the interest. There will be no ceiling on the amount that you can claim as a deduction. You may, however, note that the total deduction under Section 80C cannot exceed Rs 1 lakh and further that the total of deductions under sections 80C, 80CCC and 80CCD cannot exceed Rs 1 lakh. You may further note that the rental income from the property let out by you will be treated as income chargeable under the head income from house property.

Query

I purchased a flat in January 2005 for Rs 11 lakh. I took a Rs 9-lakh housing loan and borrowed Rs 2 lakh from my wife who gave me the funds by pledging her jewellery with a bank. I paid Rs 27,000 as stamp duty for getting the property registered. Will the stamp duty qualify for rebate under Section 88?

Murugan

Reply

The stamp duty payment will qualify for rebate under Section 88. For the assessment year 2005-06, the amount that will qualify for rebate under Section 88 in respect of stamp duty will have to be restricted to Rs 20,000 which sum will also include the principal repayment of the housing loan. You may further note that if the gross total income exceeds Rs 5 lakh you cannot claim any rebate under Section 88.

Query

In the financial year 2005-06 is there any restriction on the amount of housing loan that will qualify for deduction under Section 80C?

Sudha

Reply

Unlike for the assessment year 2005-06 (previous year 2004-05), for the assessment year 2006-07 (previous year 2005-06), the amount that qualifies for deduction (earlier rebate) does not contain any internal sub-limits. The entire amount of principal repayment will qualify for deduction under Section 80C.

You may, however, note that Section 80C restricts the amount that will qualify for deduction in respect of all payments and investments stipulated in the Section to Rs 1 lakh and further that section 80CCE restricts the aggregate amount of deduction under sections 80C, 80CCC and 80CCD to Rs 1 lakh.

Query

My wife and I purchased a flat. We have both taken a loan jointly from a bank for purchase of this flat. Both of us have independent sources of income.

Will it be possible for both of us to claim deductions under the Act and if so what is the limit to which the benefit can be claimed by each of us?

S. R. Patil

Reply

Both of you will be entitled to tax benefits. The deduction under Section 80C and under Section 24 in respect of the principal repayment and the interest payment can be claimed by you in the proportion in which you own the property.

If the property is self-occupied the limit of Rs 1.50 lakh, which is the maximum amount that can be claimed in respect of interest under Section 24 will be reckoned independently with regard to each of the co-owners, that is, you and your spouse.

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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