Home BusinessFinance Can you get home loan tax benefit when property acquisition is pending?

Can you get home loan tax benefit when property acquisition is pending?

Can you get home loan tax benefit when property acquisition is pending?

My cousin participated in the e-auction of immovable properties mortgaged to one of the nationalised banks during Dec 2019 and he was declared the successful bidder of the house property (flat in Chennai). He was asked to remit the stipulated sum within a period of 20 days from the date of auction. He arranged 30 per cent of the value of the property from own source and balance sum has been borrowed from a nationalised bank as housing loan.

He was able to fulfil his commitment within the time frame. In view of litigations between the borrowing company/guarantor and the lending bank, he was able to get the sale certificate in the month of January 2020. The litigations are not yet over. The bank has not yet handed over the possession of the property to my cousin. Due to impending legal cases, my cousin is compelled to get the sale deed executed in his favor by the bank on resolution of the legal issues to avoid forfeiture of stamp duty etc.

I would like to know whether my cousin is eligible to get deduction under Section 80-C on the repayment of principal sum to the loan account and interest amount paid to the loan account under Section 24


RM Ramanathan

As per the provisions of Section 80C of Income-tax Act, 1961 , an assessee may claim deduction of the amount paid as re-payment of principal component of a loan taken for the purpose of purchase or construction of a house property, income of which is eligible to be chargeable to tax under the head ‘Income from House Property’.

As per the provisions of Section 24(b) of the Act, where the property has been acquired or constructed using borrowed money, while calculating income under the head ‘Income from House Property’, deduction shall be allowed towards payment of interest on housing loan.

In the instant case, I understand that the sale deed is not yet executed in favour of your cousin pending the litigations.

Thus, technically speaking, your cousin cannot be considered to have acquired the property. Since the acquisition of the property is pending, principal repayment and interest payment on housing loan shall not be eligible for deduction in hands of your cousin.

I am a private sector employee. I have PPF and EPF accounts. I am making 20 per cent VPF contribution to my EPF account. I also park 1.5 lakh each year in PPF account. Kindly clarify the impact of PF taxation as per 2021 budget. Does the 2.5 lakh exemption limit include, 1) PPF contribution + Employee contribution in EPF account+ voluntary contribution in EPF account (or) 2) Employee contribution in EPF account + voluntary contribution in EPF account (or) 3) Only to voluntary contribution in EPF account.

Arun A

Budget 2021 has proposed to amend Sections 10(11) and 10(12) of the I-T Act, 1961, which are summarised below:

Amendment in Section 10(11): Interest accrued inPPF account shall become taxable, to the extent it relates to contribution (in aggregate) made in excess of ₹ 2.5 lakh during a financial year. It is also to be noted currently the PPF scheme allows a maximum deposit of ₹1.50 lakh in a financial year (including amount invested in minor child’s account of which the parent is guardian).

Amendment in Section 10(12): Interest accrued in EPF account on employee contribution exceeding ₹ 2.5 lakh in a financial year shall be taxable. These amendments are proposed in separate section and have independent limit of ₹2.5 lakh each. Further, the employee contribution to provident fund shall include both the statutory as well as voluntary contribution.

The writer is a practising

chartered accountant.

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