Part I: Tax related aspects of buying and selling real estate
Nov 23, 2013
Source : The Times of India

 

DELHI: Purchase of residential property is one of the most important and long-term decisions and there are several tax aspects. Here are answers to some Frequently Asked Questions (FAQs) on various tax related aspects of property transactions.

What are the tax benefits that I can avail of for repaying a home loan?

You will be eligible to claim both the interest and principal components of your repayment during the year.

• Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 1.50 lakh or the actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)

• Principal can be claimed up to the maximum of Rs 1 lakh under Section 80C. This is subject to the maximum level of Rs 1 lakh across all 80C investments

If I buy a house jointly with my wife and take a joint home loan, can we both claim income tax deduction?

Yes, if your wife is working and has a separate source of income, both of you can claim separate deductions in your income tax returns. The repayment of principal amount of the loan can be claimed as a deduction under section 80C up to a maximum amount of Rs 1 lakh individually by each co-owner.

In cases where the house is owned by more than one person and is also self-occupied by each co-owner, each co-owner shall be entitled to the deduction individually on account of interest on borrowed money up to a maximum amount of Rs 1.5 lakh. If the house is given on rent, there is no restriction on this amount. Both co-owners can claim deductions in the ratio of ownership.

If my wife is co-owner but does not have any income then can I get entire claim of interest on home loan for the purpose of income tax deduction?

Yes, In case one of the co-owners does not have any income, the other co-owner should enter into an agreement with the spouse. The agreement should state that the entire repayment is met by only one borrower’s income. This would ensure that the main applicant will have 100 per cent beneficial home ownership, and consequently, you can avail all the tax benefits applicable to a single borrower.

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