Tax deduction not available on loan used for repair of house

Written by Suresh Surana | Updated: May 6 2014, 14:25pm hrs
I acquired a plot of land for R24,000 in May 1979, which I plan to sell now. What will be the cost of acquisition

Pramod Sharma

As per Section 55 of the Income Tax Act, 1961, where a capital asset became the property of the assessee before April 1, 1981, the assessee has the option to take higher of fair market value of the asset as on April 1, 1981, or the actual cost of the asset as the cost of acquisition. Thus, you may take R24,000 or the fair market value of the plot as on April 1, 1981, whichever is higher as the cost of acquisition.

As per Section 55A of the Income Tax Act, where the assessing officer is of opinion that value adopted by the assessee as on April 1, 1981, is higher than the fair market value as on that date, he can make reference to the valuation officer for determining the fair market value of the property.

Last week, I had to sell my gold jewellery that I purchased in 2010. What would be the tax implication of the sale


Capital gains arising from the sale of jewellery are subject to capital gains tax as per the provisions of Section 45 of the Income Tax Act, 1961. As you held the jewellery for more than 36 months, it is a long-term capital asset. The gains arising on the transfer of a long-term capital asset is termed as long-term capital gains and is liable to tax at 20.60%.

You would be eligible for indexation benefit. The cost inflation index for FY15 is yet to be notified (expected in June/July 2014). If your basic exemption is not exhausted by any other income, then the long-term capital gains will be reduced by the unexhausted basic exemption and only the balance amount will be taxed at 20.60%.

Further, you can avail of the benefit available under Section 54EC / 54F on reinvestment in specified assets and subject to certain conditions.

I am a salaried person working with a private sector bank in Mumbai. During FY14, I had a loss under the head, income from house property, and short-term loss on sale of shares. Is it necessary to file the return of income before the due date to carry forward such loss

Manoj Shetty

As per the provisions of I-T Act, you can set off the losses from house property income against your salary income in the same year (short-term capital loss setoff against the current years salary income is not allowed). The balance loss from the house property, if any, will be carried forward for adjustment in the next financial year against the income from house property.

With reference to the losses under the head capital gains, it cannot be carried forward for setoff against the capital gains income of subsequent eight years, if the return of loss is not filed before the prescribed due date, i.e., July 31, 2014, in your case.

The restriction does not apply where the losses are only under the head income from house property and carry-forward is permissible for a subsequent period of eight years. In your case, you will be required to file your return of income before July 31, 2014, as otherwise you will not be eligible to avail the benefit of carry forward and setoff of losses under the head capital gains.

During financial year 2013-14, I spent a certain sum on repair of my residential house out of a loan from a scheduled bank. Will I get deduction of R1,50,000 while computing the income from house property

Arnab Sen

A deduction of R1,50,000 in respect of interest paid is available only in a case where loan has been utilised for the purpose of acquisition or construction of house property. However, the deduction is not applicable where loan has been used for repairs of the house. If the loan is taken for repairs or renewal of a house property, the maximum deduction on account of interest is R30,000. Thus, you will be eligible for deduction of R30,000 only.

The writer is founder of RSM Astute Consulting Group

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