House renovation expenses can be deducted under ‘capital gain’

Published: March 31, 2015 12:03:04 AM

In 2009, I had spent R7.5 lakh on renovating my house. Due to some reasons, I need to sell it...

In 2009, I had spent R7.5 lakh on renovating my house. Due to some reasons, I need to sell it. Can I claim the deduction of renovation expenses,  apart from the cost of the house,  while calculating capital gain?
—SP Singh
As you spent on renovating the house, which is capital in nature, you can claim deduction as cost of improvement of the house while calculating income taxable under the head ‘capital gain’. Further, since the house has been held for more than 36 months, it would be treated as a long-term capital asset. In such a case, indexation benefit shall also be available on the cost of improvement, starting the year in which the cost was incurred.

I acquired a plot for Rs 75,000 in May 1974. I plan to sell it for Rs 15 lakh. What will be the cost of acquisition?
—Ankur Patel
As per Section 55 of the I-T Act, 1961 (the Act), where a capital asset became the assessee’s property before April 1, 1981, the assessee has the option to take higher of the 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 Rs 75,000, or the fair market value of the plot as on April 1, 1981, whichever is higher, as the cost of acquisition. Note that as per section 55A of the Act, where the assessing officer is of the opinion that the 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.

I purchased a house last month with a home loan from SBI and am paying EMIs for it. Can I claim the EMIs for investment benefit under section 80C?
—Prabhakar Kumar
An EMI consists of two components: repayment of principal and interest. The principal component qualifies for deduction under Section 80C as repayment of housing loan. Further, the amount paid as stamp duty and registration charges at the time of purchase will be eligible for deduction under section 80C. Furthermore, you can claim interest expenses actually paid, subject to maximum of R2 lakh, as loss from house property. The income from the house property can be deducted from income from salary while computing the taxable income.

Is deduction of interest on savings account deposits available only to salaried employees, or can others also claim it?
—Deepak Asthana
The benefit under section 80TTA of the Act is available to all individuals (whether salaried or non-salaried). However, where the interest income is derived from any deposit in a savings account held by, or on behalf of, a firm, an association of persons (AOP), no deduction is available while computing the total income of a partner of the firm or of any member of the association.

I work for a software firm. My father and I took a home loan jointly, but the property is in my father’s name. Will I be able to claim deduction under section 80C and 24(b)?
—P Rao
Tax benefit on a housing loan is available to the owner/co-owner of the house as the case may be. In this case, I understand that your father is the sole owner of the house and, in such a situation, even though the home loan has been taken jointly, you will not be able to claim tax benefit [under section 80C (towards principal component of the loan) and section 24(b) (towards interest)] as you are not the co-owner of the house.

I made some losses from house property in financial year 2013-14. Due to my busy schedule, I could not file my income-tax return before July 31, 2014. Can I carry-forward the loss if I file the return now?
—Subrat Giri
As per the provisions of the Act, the submission of return of loss on or before the due date under section 139(1) of the I-T Act is compulsory for availing the benefit of carry-forward of losses. However, the loss under the head ‘income from house property’ can be carried forward even if the return is filed after the due date.

By Suresh Surana

The writer is founder, RSM Astute Consulting Group
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