“PURCHASE OF SECOND HOUSE PROPERTY IN JOINT NAME”


TAX TALK-29.10.2012-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)

“PURCHASE OF SECOND HOUSE PROPERTY IN JOINT NAME”

Query 1]
I have a house in Mumbai with my name as 1st holder and wife as joint holder. The said property is occupied by us. The loan taken for the same is closed for which I used to take benefit of Interest and Installment. Now, we have invested in property in New Mumbai which is held by wife as 1st holder & me as joint holder. The house is under construction and the loan is taken in my wife’s name. The question is Can my wife take the benefit of interest on housing loan and on installment paid?  Please give your valuable view on this. [Sandeep Benegal -benegalss@svcbank.com]
Opinion:
1.      The tax implication / housing loan benefit for the second house property is not similar/ same as applicable to the first house property. The second house property has a different tax treatment under the Income Tax Act-1961.The issue is discussed in length in my Tax Talk column Dated 17.09.2012. The same can be retrieved from the links www.ehitavada.com or www.nareshjakhotia.blogspot.com.
2.      In your case it appears that
a] The first property is purchased in the joint name for the sake of convenience and the property is recorded as Individual property in the books/records of first holder. The first property is actually belonging to you and the entire benefit of housing loan, as elaborated in the query, is availed by you only.
b] The second property, though will be purchased in joint name, will be belonging to your wife alone and your wife alone would be claiming the housing loan benefit. Similarly, in the books/ records, the property would be recorded as Individual property of your wife only.

If it is so, the provision as mentioned in Point No. 1 above would not apply and your wife would be treated as the Individual owner of the property and the resultant benefit would be available to your wife alone. If however the records/ documents doesn’t justify the single ownership of the house property, then the tax treatment as mentioned in Point No. 1 above would be applicable.

Query 2]
Can you please enlighten me on the following issue:
For filling of e-TDS return, suppose out of 100 No’s of contractors (from whom tax is deducted at source against payments made to them) and 40 contractors do not have PAN No., for 20 contractors failed to furnish PAN No’s. Out of 40 contractors, company has deducted TDS @ 20% and on rest of 20, company has deducted normal rate applicable of 2% .
My question is about filling e-TDS return. Whether PAN of all the 100 contractors is compulsory or is there any provision for those deductions for which PAN is not available? Is there any fixed % of minimum numbers of PAN of the total deductions while filling E TDS return like at least 75 % Pan No. should be available for every 100 deductions made?  [dineshsinghgaharwar@rediffmail.com]

Opinion:
1.      Section 206AA requires Deductee receiving any sum/income which is liable to TDS to furnish his PAN to the Deductor. In case, the Deductee fails to furnish his PAN, the Deductor is liable to deduct tax at a rate which is higher of the following:
(1) the rate specified in the Act;
(2) the rate or rates in force or
(3) at the rate of 20%.
2.      In the case of 20 contractors, you have deducted tax @ 2% even though it should have been done @ 20% as the PAN is not furnished by the deductee. You have to either get the PAN from the concerned deductees or have to collect/pay the balance amount of tax to the Government Treasury to avoid all the penal consequences.
3.      Before 01.10.2010, it was mandatory to submit e-TDS/e-TCS return with certain percentage of PAN of Deductees failing which return filing was not possible. After releasing new codes as C & T for higher rate and for non deduction of TDS for transporter, e-TDS/e-TCS return can be validated without 100% PAN numbers of Deductees. To submit return without having 100% PAN, you have to select higher rate as coded "C" in column named "Reason for non-deduction / lower deduction" as appearing in the quarterly return.


Query 3]
I want to purchase new flat at the cost of Rs. 25 Lacs for which I will be applying for the Bank loan. I want to know, up to what extend, I will get Income Tax exemption. Last year, I paid yearly Income tax of Rs 1,30,000/-. I request you to guide me on the above query through your Tax –talk column. [R.K.Deshpande, Opp. Bus stand, Darwha, District: Yavatmal]

Opinion:
There is no change in the deduction available towards interest & principal repayment of the housing loan. The same has been discussed at length in earlier issues of Tax Talk as well.
For the mass benefit, we are reproducing the income tax benefit towards interest & principal repayment available u/s 24(b) or U/s 80C of the Income Tax Act-1961 as under:
Interest payable on Home loan:
1.      U/s 24(b) of the Income Tax Act-1961, deduction up to Rs. 150,000/- is admissible against the interest payable on the loan availed for purchase / construction of the self occupied house property.
[However, the acquisition or construction of the house property should be completed within 3 years from the end of financial year in which home loan was taken; otherwise, the deduction would be restricted to Rs. 30,000/-]
  1. In respect of loan taken prior to 01.04.1999, the deduction can’t exceed Rs. 30,000/- for the self occupied house property.
  2. Pre-construction period Interest [Loan taken against/for under construction property]:
    The interest paid during the period the house property is under construction is not deductible in the year of payment. Interest in respect of pre-construction period is deductible in five equal annual installments commencing from the previous year in which the house is constructed/acquired. For this purpose “pre-construction period” means the period commencing on the date of borrowing and ending on March 31 immediately prior to the date of completion of construction /acquisition.
  3. In respect of self occupied house property, it may be noted that for purchase / construction, interest deduction is admissible up to Rs. 1.50 Lacs whereas there is a ceiling of Rs. 30,000/- only in respect of loan taken for Repairs/ Renewal or Reconstruction.
Principal repayment of the home loan:
In respect of principal repayment of home loan, deduction is admissible u/s 80C. Overall deduction U/s 80C (which also includes deduction towards LIC/ PPF, Tuition fees etc) can’t exceed Rs. 1 Lacs.


Comments

  1. I am a salaried employee living in a rented accommodation and availing HRA and tax benefits. My wife a home maker and does not have any income. Recently my father-in-law gifted money to my wife to buy a flat and we bought a flat in my wife's name. We are planning to move to that newly bought flat. Once we move, I will loose the HRA related tax exemption. My question is that can I take a housing loan for a one more house to avail tax savings?. Is the flat in wife's name treated as my property too?

    ReplyDelete
  2. There are many investors who has queries related to buying new properties There is good amount of knowledge being shared by some experts on this blog, Good to see there are blogs which are giving advice to new investors.

    Raheja Developers

    ReplyDelete

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