Can I buy two residential house properties to claim exemption on long-term capital gains from the sale of one house? Can I buy two house properties in the joint names of self and other family members to claim an exemption for long-term capital gains from the sale of one residential house property held for 20 years by me? I will buy one house 1-2 months before the sale in the names of myself,f my son me and another one within 2 years from the date of sale, in the names of myself and my daughter using the entire sale proceeds. If not, please guide me as to how I should go ahead with a view to ensuring that the house could be passed on to my son and daughter without any income tax implication in the event of my death?
Please note that to avail the tax exemption under Section 54 for long-term capital gains from the sale of a residential house, individuals or an HUF are required to invest only the long-term capital gains and not the sale consideration. Since the benefit of indexation is no longer available for claiming exemption, you will have to invest the actual difference between the sale price and its cost price.
Though the law requires investment to be made in one residential house property in India but there is a one-time exception where you can invest the capital gains arising from the sale of one residential house in two separate residential houses provided the amount of long-term capital gains does not exceed Rs. 2 crores. In case you have not availed this once-in-a-lifetime opportunity in the past, you can avail exemption from long-term capital gains by investing in two residential house properties. The residential house can be bought within two years after the sale of the house. The exemption is still available if a residential house is purchased within one year before the date of sale of the residential house.
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The amount which is not utilized by the due date of filing of the ITR is required to be deposited in a bank account under the Capital Gains Account Scheme, which can be utilized for the same purpose.
There is no bar on you buying the new properties in joint names of yourself and your son or daughter. What is required is that you should invest the required amount of long-term capital gains in your name. Your son or daughter can be made a joint owner in the agreement even if they do not invest any money in the property. In order to ensure that the property passes on smoothly to your son and daughter after your death, please prepare a will specifying the share of your son and daughter in all your properties, whether movable or immovable. Your son or daughter will not have to pay any tax on the property inherited after your death.
Are tax benefits available for a home loan taken to buy addition space ian redeveloped building? My housing society is going for redevelopment and while doing so I am planning to go for additional area in the new flat which will be allotted to me and which will be financed through a home loan. This is the only home I own. My query is whether the loan will be eligible for the tax benefit for principal as well as for interest?
Under Section 80 C, an assessee is entitled to a deduction up to Rs. 1.50 lakh towards repayment of home loans taken from specified entities like banks, housing finance companies, Central or State government etc for a residential house. This deduction is available together with other qualifying items like life insurance premium, contribution to Provident Fund and Public Provident Fund etc. Since a joint owner of a property, who just owns a part of the property, is entitled to tax benefits in respect a home loan, there is no reason why you should not be entitled to tax benefits for interest and principal loan repayment of home loan taken to buy additional area in your existing flat. Since your loan would be taken to buy a share in the house property, in my opinion, you will be entitled to claim a deduction under Section 80 C provided you opt for the old tax regime.
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As far as the claim for your interest is concerned, it would be restricted to Rs. 2 lacs per year as you yourself would be staying in the house under the old tax regime. If you opt for the new tax regime, you will not be able to claim any rebate in respect of interest. Had you bought another house and let it out, you would have been entitled to claim the full interest paid in respect of the loan taken for buying such house under the old tax regime subject to restriction of set off of Rs. 2 lakhs of losses under the house property against other income during the year. Under the new tax regime you would be able to claim interest to the extent of net taxable rent amount as set off of losses under the house property against other income is not allowed under the new tax regime.
How are the assets to be distributed after the death of a person, and what is the tax liability of the recipient?
My father has passed away. Is there any tax liability on me for the asset I receive on his death? In almost all the investments, my father invested jointly with my mother, so after presenting the death certificate, all the investments in which my father is the first holder would be redeemed/transferred to my mother’s name/account. Is she liable for tax on the investments so transferred? My father had mostly invested in bank FD and mutual funds. How much money can I transfer to my mother, my wife or to me?
As far as who will succeed to these assets is concerned, it depends on whether your father had prepared a valid will or not. In case your father had prepared a valid will, the assets left behind by your father will devolve as per the instruction of the will. However, in case he has died interstate i.e. without leaving the will or has not willed all the assets owned by him, such assets will pass on to the legal heirs as per the provisions of the succession laws applicable based on your religion. As per the provisions of Hindu Succession Act, the assets of a person dying interstate shall equally devolve on the Class I heirs in equal share. In your case the same shall be divided equally between your mother and you as his heir, as there are there are no other legal heir of class I (assuming you have no brother or sister).
Any asset received as inheritance either under a will or under the personal law of the recipient is not treated as income of the recipient and thus is not subject to income tax. So you, your mother or your wife whosoever gets any assets of your father, do not have to pay any income tax on such inheritance as the receipt of the assets on the demise of your father will not be taxable in the hands of the recipient.
Who can claim tax benefits for a home loan? My father got a plot in a government lottery scheme and took a house loan to construct a house. I am the co borrower in the home loan but the registry of plot is on the name of my father. The EMI installments are paid from my account. I want to know whether I will get the income tax rebate for the EMI paid by me? My father is not claiming any rebate. We are staying in the house.
To claim tax benefits in respect of a home loan under Section 80 C as well as Section 24(b), the person must be the owner of the property as well as the borrower. The ownership may be either single or joint.
Since you are not the owner or co-owner of the property, you will not be able to claim any tax benefits in respect of the loan serviced by you, even though you are a co-borrower and servicing the loan, and your father has not claimed any rebate in income tax laws. If you want to avail the tax benefit in respect of the loan, you will have to become a co-owner of the property. You can become a co-owner in two ways. Either you can purchase part of the plot from your father or your father gifts you part of the plot. Please note that the deduction for home loan will be available to you in the ratio of your share in the loan and not in the ratio of your share in the property.
So, in case you are servicing the full loan, you can take tax benefits in respect of full interest and full repayment made by you within the limits available under Section 80 C and 24b. Please note that no tax benefits are available under the new tax regime under Section 80C for repayment of the home loan, whether the house is self-occupied or let out. Likewise, deduction for interest under Section 24(b) is not available for self-occupied house under the new tax regime.
Balwant Jain is a tax and investment expert and can be reached at [email protected] and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts and not of Mint. We advise investors to check with certified experts before taking any investment decisions.