Housing loan related

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Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2012 If I contribute some money to my unmarried son for buying a flat/house in NOIDA, is there a possibility for me to claim any income tax relief? My son would also be utilising a housing loan, besides contributing some minor amounts from his salary savings, sale of shares, etc. I am senior citizen and would be contributing from retirement benefits. I am in 30% IT bracket. It is proposed to buy the house jointly in the names of my wife and son.

@VaibhavJ

@VaibhavJ (Expert)
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09 December 2012 Dear Sir,

Tax benefit from investing in property are :

1. Interest on Hosing loan &
2. Principle repayment of Housing Loan taken.

Both the benefits are available to the owner of the house, as you have mentioned you are not the owner of house & loan has been taken by your son.

So in above circumstances you wont be able to claim any benefits unless you are the co - owner of the flat.

Thanks//Vaibhav
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Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2012 Thanks. Is there any present or future IT implication for me or my son due to my contribution to my son. Will it be treated as a gift or income or any such thing? Or there is no implication at all?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 When you contribute funds towards purchasing a property for your unmarried son and the property is registered jointly in your son's name and your wife's name, there are several tax implications and considerations for both you and your son under the Income Tax Act, 1961. Here’s a detailed analysis of the potential tax consequences and reliefs:

### 1. **Tax Implications for Your Contribution**

**A. Treatment of Contribution**

1. **Gift Tax Implications:**
- **Gift Tax Act**: Under the Income Tax Act, any amount given to your son, if it exceeds ₹50,000 in a financial year, is considered a gift. However, gifts from a parent to a child are generally exempt from gift tax. This means you won't have to pay tax on the amount gifted to your son.
- **Documentation**: It is advisable to document the gift transaction properly, including a formal gift deed, to avoid any future disputes or misunderstandings.

2. **Income Tax Implications:**
- **No Immediate Income Tax**: The amount contributed towards the property will not be treated as your income, so there’s no immediate income tax liability for you on the amount you contribute.

### 2. **Tax Relief on Housing Loan**

**A. Deduction on Housing Loan Interest and Principal Repayment**

1. **For Your Son:**
- **Interest Deduction**: Your son can claim a deduction on the interest paid on the housing loan under Section 24(b) of up to ₹2 lakh per annum if the property is self-occupied. If the property is let out, he can claim the entire interest as a deduction against rental income.
- **Principal Repayment**: Under Section 80C, your son can claim a deduction for the principal repayment up to ₹1.5 lakh per annum.

2. **Joint Ownership:**
- **Proportional Deductions**: If the property is jointly owned, both you and your son can claim deductions on the housing loan interest and principal repayment proportionate to your respective shares in the property. If you are contributing to the loan or making EMI payments, you may be eligible to claim deductions proportionate to your ownership share.

**B. Claiming Deductions:**
- **Loan Documents**: Ensure that the loan documents and property registration reflect the joint ownership clearly. The claim for deductions should align with your share in the ownership.

### 3. **Future Implications**

**A. Income from Property:**
- **Rental Income**: If the property is rented out, the rental income will be taxable in the hands of the co-owners based on their share of ownership. Your son and wife will report rental income as per their share.

**B. Capital Gains Tax:**
- **Sale of Property**: Upon selling the property, any capital gains will be calculated based on the sale price minus the cost of acquisition (including any capitalized costs and improvements). The gains will be divided according to the ownership share, and each co-owner will be taxed accordingly.

**C. Inheritance and Future Transactions:**
- **Inheritance**: If the property is inherited in the future, there are no immediate tax implications for the inheritance itself, but capital gains tax will apply when the property is sold.
- **Gifts and Transfers**: Any future gifts or transfers of the property or its share will have to be carefully documented to ensure compliance with tax regulations.

### Summary

1. **Your Contribution**: As a senior citizen contributing towards your son’s property, your contribution is treated as a gift and is exempt from gift tax. There is no immediate income tax on the amount you contribute.

2. **Tax Deductions**: Your son can claim deductions on the housing loan interest and principal repayment, with the possibility of claiming proportional deductions if the property is jointly owned.

3. **Future Implications**: Be aware of the tax implications for rental income and capital gains in the future. Proper documentation and adherence to tax laws will ensure smooth handling of any future tax matters.

To ensure compliance and optimize tax benefits, you might consider consulting a tax advisor or financial planner who can provide personalized guidance based on your specific situation.