No interest on home loan this FY
I understand that if there is any capital gain that I earn on transfer of land, I need to re-invest in a house property to enjoy tax exemption. I also understand that if the re-investment is not made in stipulated time, an investment needs to be made in the bank. What are the conditions? If I had invested in the capital gains in the bank in FY12-13, can I draw the money from the account for meeting the cost of construction in September 2016? - Krishnamurthy
You can invest in a house within stipulated time or in a capital gains account scheme which is to be used for the purchase or construction of a house within the stipulated time and claim exemption under section 54F, only if you satisfy the other conditions.
For exemption, you need to follow these:
1. The assessee is an individual or HUF, 2. The gain arises from the transfer of long term capital asset not being a residential house, 3. The assessee, within one year before or two years after the date of sale purchases or within three years constructs any residential house (a new asset), 4. The assessee does not own more than one residential house, other than the new one on the date of transfer or does not purchase within one year.
For claiming exemption, the amount that is not invested for purchasing the new asset within one year before the date of transfer or which is not utilised for the purchase or construction of the new asset before the due date of furnishing the return of income for the relevant assessment year, has to be deposited before the due date for furnishing the return of income, in any bank or an institution in a specified account known as “Capital Gains Account Scheme”.
The amount so invested may be drawn for the purpose of purchase or construction of the new asset within the specified time.
I purchased a house in July 2013 by taking a loan. However, I will receive the possession of the house in September 2014? I want to know whether the interest benefit will be available for the FY 2013-14. - Suresh M.
You will not be entitled to claim interest on housing loan for the FY 2013-14.
This is because section 24 (1) (VI) of the Income-Tax Act says: “Where the property has been acquired or constructed with borrowed capital, interest, or constructed, as reduced by any part thereof allowed as a deduction under any other provision of this Act, shall be deducted under this clause in five equal annual installments, commencing the previous year the house was acquired or constructed.”
So, the interest for FY13-14 will be deductible in five installments beginning with FY 2014-15.
(Kamal Rathi is a Hyderabad-based CA and can be contacted at kamalrathi.ca@gmail.com)
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