​​​
  1. Income tax returns filing: What you should know about this benefit of home loan repayment

Income tax returns filing: What you should know about this benefit of home loan repayment

In case the house acquired with a home loan is sold within five years from the end of the year in which possession of the house has been taken, all the deductions allowed on principal amount under Section 80C in the earlier years shall be withdrawn.

By: | Published: September 25, 2017 4:59 AM
Income tax returns filing, benefit of home loan repayment, home loan repayment,  rental income, Income Tax Act In case the house acquired with a home loan is sold within five years from the end of the year in which possession of the house has been taken, all the deductions allowed on principal amount under Section 80C in the earlier years shall be withdrawn.

I have been availing tax benefits for home loan repayment (principal as well as interest). Now, I wish to sell the house. What will be the tax implication?
– Suresh Sahu

In case the house acquired with a home loan is sold within five years from the end of the year in which possession of the house has been taken, all the deductions allowed on principal amount under Section 80C in the earlier years shall be withdrawn. This shall be treated as income of the year in which the said property is sold. Further, no deduction under Section 80C shall be allowed for principal repayment made during the year. However, there is no reversal of interest benefit even if you sell the house before five years, as is applicable for repayment of principal amount as mentioned
above.

A residential flat is jointly owned by me and my wife in equal proportion. The said flat fetches rental income and the same is shared and offered to tax by both of us. Now we are planning to gift our respective shares to our two minor daughters. After the gift is made, will rental income be taxed in the hands of the minors?

—Arun Goyal

As per Section 27 of the Income Tax Act, where an individual transfers any house property for inadequate consideration to a minor child, he is deemed to be the owner of the house property despite the fact that the ownership of the property has been transferred to the minors. Accordingly, income from such house property shall continue to be taxable in the hands of such individual. In the present case, 50% of house property is owned by you and and another 50% by your wife and it shall be transferred for inadequate consideration. Thus, the provisions of Section 27 shall be attracted and you and your wife will continue to be deemed to be owners of the property for the purpose of calculating income from house property, even though the property has been transferred in the hands of minors. As a result, income earned from such house property shall continue to be taxed in the hands of your wife and yourself.

The writer is the founder of RSM Astute
Consulting Group. Send your queries to fepersonalfinance@expressindia.com

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Go to Top