Income from house property
This query is : Resolved
08 December 2008
I got an allotment of housing board flat of the TamilNadu Housing Board (TNHB), through Government Quota in my name.
TamilNadu housing board wanted an application for the allotment of the flat based on the government orders.
As I was about 63 years old and had no major income, I included the name of my first son in the application along with my name.
TNHB approved the application and gave the allotment orders of the flat in joint name of my first son and me.
TNHB gave the A certificate and B Certificate and outright purchase agreement in the favour of Bank of Baroda. A legal opinion was obtained on the title based on the above documents and nil encumbrance certificate.
First son approached Bank of Baroda and got a home loan, cleared the entire outstanding with TNHB through a banker’s cheque.
First son also obtained private loans to fund the balance cost of flat.
He was regularly paying the monthly EMI to the Bank, he was also claiming income tax benefits under income from housing property for 3 years.
Subsequently he had to leave India to Nigeria from where transfer of money was going to be difficult and long drawn process and he was also not interested in owning a flat in India.
So he gave in writing to TNHB that he is not interested to be a owner or co owner in the flat and wanted his name to be deleted and in his place his brother be included who has adequate resource to take Bank loan and meet the cost and pay the EMIs.
An affidavit was obtained from my first son to this effect and given to TNHB along with the concurrence of my second son (his brother) and myself.
Accordingly TNHB gave a letter stating that they have included my second son’s name also.
Based on this letter Bank of Baroda sanctioned a home loan to my second son, myself and my first son in Aug-04
Now, my second son is regularly meeting the EMI from his salary and also took over the private loans for which also he is paying the interest.
The property was rented out.
While filing IT returns, my second son showed only 50% of rental income as income from property by mentioning 50% Co-owner and the remaining 50% was shown as income in my name. The interest paid on the Bank loan and private loan was claimed in full for deduction from Income tax as it was totally met from my second son’s salary and borrowings.
The balance 50% of rental income was shown in my name and while filing my IT returns and I did not claim any amount under Interest paid.
The ITO on scrutiny of the returns has stated that since second son has shown only 50% of the rental income he can only claim only 50% of the interest paid as he is a 50% Co owner.
The property is not yet registered.
The documents that have been given by TNHB to the Bank do not mention % of share in the property against each name.
Under the circumstance how to substantiate the ITO view point as below on the IT returns submitted by my second son.
Under income from house property in my second sons name, it is shown as below
Rent received is shown as 50% of total rent received being 50% Co-owner
Less 30%
Less Municipal taxes
Less total (100%) interest paid to both bank and private loans
The ITO points out that as rental income has been shown as 50% hence my second son can claim only 50% with respect to the interest paid to both the banks and private loans.
I would require some I.T. rules or rulings or case laws or Tribunal decisions.
The point to note is I have not paid any amount towards the cost of acquisition of the property. The property has been financed only by my second son through Bank loans and private loans in full.
How to justify, that my second son uses 50% rent in his I.T. return and I use 50% rent in my I.T. return and also my second son is authorized to claim 100% of the interest paid on bank loan and private loan (as he has met the entire cost of the flat and paying the interest on all the loans – bank and private loans) in his I.T. return.
TamilNadu housing board wanted an application for the allotment of the flat based on the government orders.
As I was about 63 years old and had no major income, I included the name of my first son in the application along with my name.
TNHB approved the application and gave the allotment orders of the flat in joint name of my first son and me.
TNHB gave the A certificate and B Certificate and outright purchase agreement in the favour of Bank of Baroda. A legal opinion was obtained on the title based on the above documents and nil encumbrance certificate.
First son approached Bank of Baroda and got a home loan, cleared the entire outstanding with TNHB through a banker’s cheque.
First son also obtained private loans to fund the balance cost of flat.
He was regularly paying the monthly EMI to the Bank, he was also claiming income tax benefits under income from housing property for 3 years.
Subsequently he had to leave India to Nigeria from where transfer of money was going to be difficult and long drawn process and he was also not interested in owning a flat in India.
So he gave in writing to TNHB that he is not interested to be a owner or co owner in the flat and wanted his name to be deleted and in his place his brother be included who has adequate resource to take Bank loan and meet the cost and pay the EMIs.
An affidavit was obtained from my first son to this effect and given to TNHB along with the concurrence of my second son (his brother) and myself.
Accordingly TNHB gave a letter stating that they have included my second son’s name also.
Based on this letter Bank of Baroda sanctioned a home loan to my second son, myself and my first son in Aug-04
Now, my second son is regularly meeting the EMI from his salary and also took over the private loans for which also he is paying the interest.
The property was rented out.
While filing IT returns, my second son showed only 50% of rental income as income from property by mentioning 50% Co-owner and the remaining 50% was shown as income in my name. The interest paid on the Bank loan and private loan was claimed in full for deduction from Income tax as it was totally met from my second son’s salary and borrowings.
The balance 50% of rental income was shown in my name and while filing my IT returns and I did not claim any amount under Interest paid.
The ITO on scrutiny of the returns has stated that since second son has shown only 50% of the rental income he can only claim only 50% of the interest paid as he is a 50% Co owner.
The property is not yet registered.
The documents that have been given by TNHB to the Bank do not mention % of share in the property against each name.
Under the circumstance how to substantiate the ITO view point as below on the IT returns submitted by my second son.
Under income from house property in my second sons name, it is shown as below
Rent received is shown as 50% of total rent received being 50% Co-owner
Less 30%
Less Municipal taxes
Less total (100%) interest paid to both bank and private loans
The ITO points out that as rental income has been shown as 50% hence my second son can claim only 50% with respect to the interest paid to both the banks and private loans.
I would require some I.T. rules or rulings or case laws or Tribunal decisions.
The point to note is I have not paid any amount towards the cost of acquisition of the property. The property has been financed only by my second son through Bank loans and private loans in full.
How to justify, that my second son uses 50% rent in his I.T. return and I use 50% rent in my I.T. return and also my second son is authorized to claim 100% of the interest paid on bank loan and private loan (as he has met the entire cost of the flat and paying the interest on all the loans – bank and private loans) in his I.T. return.
09 December 2008
I suggest you visit http://www.apnaloan.com/home-loan-india/claimentiretaxbenefit.html
09 December 2008
Apnaloan talks about entire tax benefit but doesnt talk about the share in rent.
With the rent being shared can the second son claim 100% interest paid (bank and private loan).
To substantiate to the ITO I need I.T. rules or rulings or case laws or Tribunal decisions.
Apnaloan doesnt provide them.
With the rent being shared can the second son claim 100% interest paid (bank and private loan).
To substantiate to the ITO I need I.T. rules or rulings or case laws or Tribunal decisions.
Apnaloan doesnt provide them.
09 December 2008
On a reconsideration of the matter, I modify my reply as follows:
Benefits under Sec 80-C and 24 could be availed only in proportion of ownership rights. Mere fact of EMI payments being actually made by second son does not entitle second son to claim benefits u/s 80-C and 24 to full extent.
Benefits under Sec 80-C and 24 could be availed only in proportion of ownership rights. Mere fact of EMI payments being actually made by second son does not entitle second son to claim benefits u/s 80-C and 24 to full extent.
09 December 2008
The share in the property is not known as it is not yet registered and neither does the document given by TNHB say the share against each name. It is a joint property without sharing rights.
Under the circumstances how to substantiate.
Under the circumstances how to substantiate.
10 December 2008
Then on what basis your second son showed 50% of rent received as his income and how did you show 50% of rent in your return.
I don't think any ITO will allow your second son or any one for that matter to include only 50% of rent received as income and 100% of related payment (EMI)
I don't think any ITO will allow your second son or any one for that matter to include only 50% of rent received as income and 100% of related payment (EMI)
13 February 2009
Please check if the following link helps you
http://www.taxworry.com/2009/01/can-quantum-of-deduction-us-24-section.html
http://www.taxworry.com/2009/01/can-quantum-of-deduction-us-24-section.html
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