Taxation
1. Are there any benefits in terms of Taxation if I buy a house?
Yes, Tax laws in India allow for various incentives through which the tax payable by you is reduced if you buy a residential apartment of any kind.
2. What are the Taxation advantages of owning a house?
These are the advantages of owning a house from the taxation point of view:
Yes, Tax laws in India allow for various incentives through which the tax payable by you is reduced if you buy a residential apartment of any kind.
2. What are the Taxation advantages of owning a house?
These are the advantages of owning a house from the taxation point of view:
- Interest on the Housing Loan you take is exempted up to a ceiling of Rs.1,50,000 under Section 24
- A deduction of Rs.1, 00,000 is available for the repayment of the principal of a home loan.
- Exemption is available from Capital Gains Tax under Section 54F. This means that if you acquire any capital asset which is not a residential house, and therefore are liable to pay Capital Gains Tax, the amount on which you will be required to pay the same can be reduced by the amount that you spend on a residential house provided the said residential house is acquired 1 years before or 2 years after the transfer, or is constructed within 3 years of the transfer.
3. What is the loan amount that would give maximum tax benefit to a salaried person?
The maximum amount of interest that is allowed as deduction while computing the gross income of a person is Rs. 1,50,000. Therefore, if a salaried individual takes a loan such that the interest payable on it equals Rs.1,50,000 per annum, or is as close to this amount as possible, then he would gain the maximum tax relief.
4. Do I have to pay any tax on "Income from House Property"?
Income from house property is taxable just as any other income like salaries, profits & gains of business and profession etc. and added to total income.
5. How do I compute my Income from House Property?
Income from House Property is computed on the basis of Annual Value of the property. Annual Value as distinguished from rental value is calculated based on inherent capacity of the house property to earn income. "Inherent Capacity" denotes the amount for much the property might be reasonably let out. This could be actual rent paid by the tenant or annual rateable value fixed by municipality, or the rent of similar property in the locality etc.
6. Do I have to pay Income Tax on Annual Value of the house occupied by me?
No, when a house property is self occupied the Annual Value of such property is taken as "nil" and as such no income tax is payable. In fact you shall be eligible for deductions such as interest etc. from your total income.
However, if you happen to be owner of more than one house property for own residential purposes then only one house (as per your choice it is also not necessary that you are residing in that house) can be treated as self occupied and the Annual Value of such property be taken as nil, all other houses shall be deemed to be let out and Annual Value shall be computed accordingly.
7. What are the deductions available to me in case of self occupied property?
Interest payable (whether paid or not) on loan for purchase, repairs, renewals, construction or reconstruction of house property is allowed as a deduction ( from total income) up to Rs.30000/- The Finance Act,2000 has given a huge incentive to the housing sector in respect of purchase of new housing stock. It provides that where a house property is acquired or constructed after 1st April 1999 and such acquisition or construction is completed before 1st April 2003, then the deduction allowable on interest payable shall be up to Rs.1, 50,000/- p.a. It may be pertinent to note that interest attributable to period prior to acquisition / construction is also allowable as deduction. For the purpose of such deduction the interest paid/payable before the final completion of construction or acquisition of the property will be aggregated and allowed in equal instalments over five successive financial years starting from the year in which the acquisition or construction is completed. However, this benefit is not allowed for any repairs, renewals or reconstruction work.
8. What are the deductions available to me in case of a property given on rent or which is deemed to be let out?
The following deductions are permissible:
The maximum amount of interest that is allowed as deduction while computing the gross income of a person is Rs. 1,50,000. Therefore, if a salaried individual takes a loan such that the interest payable on it equals Rs.1,50,000 per annum, or is as close to this amount as possible, then he would gain the maximum tax relief.
4. Do I have to pay any tax on "Income from House Property"?
Income from house property is taxable just as any other income like salaries, profits & gains of business and profession etc. and added to total income.
5. How do I compute my Income from House Property?
Income from House Property is computed on the basis of Annual Value of the property. Annual Value as distinguished from rental value is calculated based on inherent capacity of the house property to earn income. "Inherent Capacity" denotes the amount for much the property might be reasonably let out. This could be actual rent paid by the tenant or annual rateable value fixed by municipality, or the rent of similar property in the locality etc.
6. Do I have to pay Income Tax on Annual Value of the house occupied by me?
No, when a house property is self occupied the Annual Value of such property is taken as "nil" and as such no income tax is payable. In fact you shall be eligible for deductions such as interest etc. from your total income.
However, if you happen to be owner of more than one house property for own residential purposes then only one house (as per your choice it is also not necessary that you are residing in that house) can be treated as self occupied and the Annual Value of such property be taken as nil, all other houses shall be deemed to be let out and Annual Value shall be computed accordingly.
7. What are the deductions available to me in case of self occupied property?
Interest payable (whether paid or not) on loan for purchase, repairs, renewals, construction or reconstruction of house property is allowed as a deduction ( from total income) up to Rs.30000/- The Finance Act,2000 has given a huge incentive to the housing sector in respect of purchase of new housing stock. It provides that where a house property is acquired or constructed after 1st April 1999 and such acquisition or construction is completed before 1st April 2003, then the deduction allowable on interest payable shall be up to Rs.1, 50,000/- p.a. It may be pertinent to note that interest attributable to period prior to acquisition / construction is also allowable as deduction. For the purpose of such deduction the interest paid/payable before the final completion of construction or acquisition of the property will be aggregated and allowed in equal instalments over five successive financial years starting from the year in which the acquisition or construction is completed. However, this benefit is not allowed for any repairs, renewals or reconstruction work.
8. What are the deductions available to me in case of a property given on rent or which is deemed to be let out?
The following deductions are permissible:
- 50% of Annual Value towards repairs and collection charges ( allowed in notional basis irrespective of the amount incurred)
- Insurance premium paid for the property.
- Annual charge on the property this is a charge not voluntarily created by the assessee ( for e.g. if a person gets a property from his father in terms of a will and one of the terms of terms of the will is that a certain monthly allowance shall be paid by the son to his mother then such charge will be allowed)
- Ground Rent payable on land taken or lease.
- Interest on money borrowed for the purpose of construction or acquisition of a house property.
9. What is the position if there is a loss under the head Income From House Property?
In case of self occupied property, as the Annual Value is taken as nil deduction allowed on interest on borrowed capital up to maximum of Rs.100000/- will be the loss effective financial year 2000-2001.
In case of a let out property there are no restrictions on deducting the full interest payable on loans and so there can be loss under this head also.
Loss from house property can be set off against income from another house property and also from any other head of income such as Salaries, Profit and gains of business or profession etc. during the same financial year.
In case where the loss cannot be set off against any other heads of income within the same year then the balance loss can be carried forward and set off in subsequent years subject to a limit of 8 years but only against income from house property.
10. What is the benefit of Capital Gain in case of a house property?
Benefit on Sale of any capital assets (Section 54F)
The Income Tax Act, 1961 gives a person who does not own a residential house a concession to purchase a residential house as and when they sell s capital asset (for e.g. shares, bonds, debentures, moor car etc.). When you sell a capital asset normally you are required to pay tax on the gain in the value of asset after the benefit of indexation. If however you do not own a residential house you can reinvest the net consideration you received from the sale of capital assets in a house property and if the amount invested is equal to or more than the net consideration no income tax is payable in such capital gain. However, the following needs to be noted for claiming such benefit.
You should purchase the residential house within a period of one year before or two years after the date on which the transfer took place or construct a residential house within 3 years of such transfer.
You should not be an owner of more than one house property other than the new asset on the date of transfer of the original asset.
You should not purchase a residential house other than the new asset within a period of one year of construct any residential house other than the new house within a period of three year after the date of transfer of the original asset.
Benefits on re-investment in house property (section 54)
Apart from this if a person reinvests in a house property i.e. invests the sale proceed of a house property in purchase of new house such reinvestment is exempt from Capital Gains u/s 54 provided the new house is purchased one year before or two years after the transaction .
11. What is the benefit of Capital Gain in case of a house property?
The following payments are eligible for rebate from tax to the extent of 20% of a maximum of Rs. 20,000 (i.e. maximum rebate is up to Rs.4000p.a.) Any instalment or part payment of the amount due under any self financing scheme of any development authority, housing board etc. engaged in construction and sale of house property. Any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or Repayment of the amount borrowed by the assessee by the assessee form:
In case of self occupied property, as the Annual Value is taken as nil deduction allowed on interest on borrowed capital up to maximum of Rs.100000/- will be the loss effective financial year 2000-2001.
In case of a let out property there are no restrictions on deducting the full interest payable on loans and so there can be loss under this head also.
Loss from house property can be set off against income from another house property and also from any other head of income such as Salaries, Profit and gains of business or profession etc. during the same financial year.
In case where the loss cannot be set off against any other heads of income within the same year then the balance loss can be carried forward and set off in subsequent years subject to a limit of 8 years but only against income from house property.
10. What is the benefit of Capital Gain in case of a house property?
Benefit on Sale of any capital assets (Section 54F)
The Income Tax Act, 1961 gives a person who does not own a residential house a concession to purchase a residential house as and when they sell s capital asset (for e.g. shares, bonds, debentures, moor car etc.). When you sell a capital asset normally you are required to pay tax on the gain in the value of asset after the benefit of indexation. If however you do not own a residential house you can reinvest the net consideration you received from the sale of capital assets in a house property and if the amount invested is equal to or more than the net consideration no income tax is payable in such capital gain. However, the following needs to be noted for claiming such benefit.
You should purchase the residential house within a period of one year before or two years after the date on which the transfer took place or construct a residential house within 3 years of such transfer.
You should not be an owner of more than one house property other than the new asset on the date of transfer of the original asset.
You should not purchase a residential house other than the new asset within a period of one year of construct any residential house other than the new house within a period of three year after the date of transfer of the original asset.
Benefits on re-investment in house property (section 54)
Apart from this if a person reinvests in a house property i.e. invests the sale proceed of a house property in purchase of new house such reinvestment is exempt from Capital Gains u/s 54 provided the new house is purchased one year before or two years after the transaction .
11. What is the benefit of Capital Gain in case of a house property?
The following payments are eligible for rebate from tax to the extent of 20% of a maximum of Rs. 20,000 (i.e. maximum rebate is up to Rs.4000p.a.) Any instalment or part payment of the amount due under any self financing scheme of any development authority, housing board etc. engaged in construction and sale of house property. Any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or Repayment of the amount borrowed by the assessee by the assessee form:
- The Central or State Government
- Any bank (including co-operative bank.)
- The Life Insurance Corporation of India
- The National Housing Bank
- Any Housing Finance Company approved by National Housing Bank for the purpose of refinance.
- Any company or co-operative society that is engaged in business of financing construction of houses.
The assessee's employer where such employer is a public company as a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society. Stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee.
12. What are the provisions of Wealth Tax Act and Gift Tax Act applicable to house property?
One house or a part of the house belonging to our individual or a Hindu Undivided Family is not changeable to Wealth Tax.
Gift made after 1.10.98 do not attract levy of gift tax either in the kinds of donor or donee.
13. What are the salient features of Union Budget 2009 relating to FY 2009 - 2010, AY 2010 - 2011?
12. What are the provisions of Wealth Tax Act and Gift Tax Act applicable to house property?
One house or a part of the house belonging to our individual or a Hindu Undivided Family is not changeable to Wealth Tax.
Gift made after 1.10.98 do not attract levy of gift tax either in the kinds of donor or donee.
13. What are the salient features of Union Budget 2009 relating to FY 2009 - 2010, AY 2010 - 2011?
- Tax Rates of all categories of assessees remain unchanged. However, the tax slabs for individuals and HUFs have been modified as under:
- Surcharge has been removed for all assessees except for companies. EC continues to be 3%.
- Companies to continue to pay tax @ 30% plus a surcharge of 10%. However, Surcharge will not be leviable if the total [taxable] income of companies do not exceed Rs.1 Crore.
- Remuneration allowable to working partners has been enhanced as under:
On the first Rs.3 Lacs of Book-Profit : Rs.150,000 or at 90% of book-profit Whichever is more
On the balance of book-profit : at the rate of 60% - W.E.F.1st October 2009, payment towards freight charges can be made in cash upto Rs.35,000/- on a single day.
- New presumptive taxation system introduced for assessees who are individuals, HUFs, partnership firms having a turnover upto Rs.40 Lacs with effect from financial year commencing on 1.4.2010. Such assessees have an option of not maintaining any books of accounts provided they offer a total income @ 8% or more on their turnover. It would not be applicable for companies and transport contractors/operators. Such assessees need not pay any advance tax. However, such assessees can claim deduction u/s 80C, 80D, 80G etc. except any deduction in respect of income under chapter VIA.
- If the above assessee claims that their income is less than 8%, they would be required to get their books of accounts audited u/s 44AB.
- At present, for the purpose of computing capital gains in respect of any immovable property, guideline value of such property is considered as sale consideration, provided the sale transaction executed through a sale deed u/s 50C. This provision was not applicable for sale through power of attorney. With effect from 1.10.2009, even sale transaction routed through power of attorney would attract provisions of Sec.50C.
- At present, any gifts in kind from non-relatives in excess of Rs.50,000 is outside the purview of income tax. With effect from 1.10.2009, any gifts received from non-relatives in kind [eg., shares, land, building, jewellery etc.,] in excess of Rs.50,000 would be considered as income from other sources in the hands of the recipient. This would include any asset received for a consideration, but such consideration is less than the fair market value of such asset.
- Deduction u/s 80DD towards maintenance including medical treatment of handicapped dependent increased from Rs.75,000 to Rs.1,00,000.
- Educational loans taken for the purpose of graduation / vocational courses would also be eligible for deduction u/s 80E.
- Rate of tax under Minimum Alternate Tax for companies u/s 115JB increased from 10% to 15%. MAT thus paid can be carried forward to be adjusted against regular income tax liability of future years for 10 years.
- Fringe benefit tax abolished.
- It has been clarified that LLPs under Limited Liability Partnership Act 2008 would have the same tax treatment as a normal partnership firm.
- Section 194C in respect of TDS on contracts / sub-contracts has been modified w.e.f. 1.10.2009 as under:
- There would not be separate rate of TDS for sub-contractors and TDS on advertisement as existing at present.
- Where the payment is made to a contractor who is an individual or HUF, rate of TDS would be 1%.
- For all others, the rate of TDS would be 2%.
- 4If the payment is towards freight and the contractor furnishes his PAN to the payer, then TDS need not be deducted.
- TDS rates on rent u/s 194I has been modified w.e.f. 1.10.2009 as under:
- 2% in case of rent for plant and machinery, equipment
- 10% in case of rent for land, building, furniture & fittings
- If a payment is made for which TDS is deductible and the payee does not furnishes a PAN or provides a wrong PAN, then rate of TDS shall be 20%.
- Quoting of PAN for deductees has been made mandatory.
- Any person, who furnishes Form 15G/H, shall compulsorily quote his PAN.
- Limit for payment of advance tax has been raised from Rs.5000 to Rs.10000 with effect from AY 2009-10.
- Wealth Tax exemption limit increased from Rs.15 Lacs to Rs.30 Lacs.
- Service tax imposed on following new services:
- transportation of goods by rail
- cosmetic surgery or plastic surgery
- transportation of coastal goods, goods sent through inland waterways
- advisory, consultancy, or assistance in any branch of law rendered by law firms to other entities other than individuals.
