Deduction under Section 80C to Co-owners of property

Tax queries 1190 views 3 replies

Samir

ACA

113 Points Joined March 2010

Sec 80C (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh rupees.

(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee—

(xviii) for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head “Income from house property” (or which would, if it had not been used for the assessee’s own residence, have been chargeable to tax under that head), where such payments are made towards or by way of—

(a) any installment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or

(b) any installment 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

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In case a House property and Loan is Co-owned by 4 assesses (Husband, Wife, Father and mother). Forget the provision of Section 24(b)

How will the deduction u/s 80C apply?

Will it be available only to the payer of the loan {as per section 80C(2)}?

What if for 2-3 F.Y only 2 joint assesses (husband and wife) re-pays the principal amount borrowed under HL, while the other 2 don’t pay at all?

What if later the 2 assesses (husband and wife) lose their jobs and have no money and later on the other 2 assesses (Father and Mother) repays the loan for 4^th F.Y onwards, can the later 2 assesses (Father and Mother) claim deduction u/s 80C as they are co-owners and the principal amount of loan has been actually paid by them? (No need to emphasis that the former 2 will not claim any benefit of the same u/s 80C)

This is an actual situation, so I expect some genuine answers, Thanks to all.

Replies (3)

Samir

ACA

113 Points Joined March 2010

Hello Everybody!

Ccan anyone comment please !

Amir

Learner

4016 Points Joined December 2009

HI Sir,

1) Each co-owner is eligible to get the deduction provided he/she makes the repayment.

2) Yes, it will be available only to the payer except in case of clubbing of income, where

Interest on borrowals invested in properties owned by wife/minor children is deductible - Where the assessee had borrowed money at interest to purchase certain house property in the names of his wife and minor children and the income from that property was included in the assessee’s total income under the provisions of section 64(1)(iv) and (v), it was held that the assessee’s claim for deduction of interest on borrowed money under section 24, read with section 27(1), could not be rejected on the ground that the borrowing had been effected, not in the name of the assessee’s wife or minor children, but in his own name - S.M.A. Siddique v. CIT [1984] 148 ITR 307 (Mad.).

3) & 4) - Tax consequences of shifting of repayment burden - (From children to parents or vice versa)

Very tough to give one reply...it will depend on facts of each case i:e under what circumstances the repayment burden is shifted and whether the co-owners intends to give its effect along with the title of the property or not? etc, etc.........Presence (or absence) of Legal documentation (or amendments therein) at every level shall be having a vital role to play in deciding its treatment

Just to give you a hint the following possible situations will have different treatments -

1) If it is clubbed (in case of shifting by parents to son's wife)

2) If it is treated as Gift

3) If it is treated as Sale

CA B Anand

CHARTERED ACCOUNTANT

198 Points Joined September 2009

SAMIR SIR,

in the first 2 years, both husband and wife can claim deduction to the extent of principal repaid...

and in the later years their parents can claim deduction if they are paying..

for claiming under 80 c, 2 conditions required..ownership and repayment...even if one is not satisfied, then they wont get any deduction..

this is similar to school tuitionfee paid....imagine if a father s claiming 80 c by paying his sons tuition fee, he can claim in that year...but in later years if her wife gets employed and earns good salary, she can claim provided she pays the tuition fee....