Dhanesh (Service) (75 Points)
26 October 2011Hi,
I have flat in Jaipur for wich I took a loan from HDFC Ltd. As per rule I can't claim HRA & Principle and Interest exemption both (correct if I am wrong). What if I gift this flat to my wife (House wife-No Income). Then claim HRA exemption for payment of Rent to my wife and claiming Principle and interest exemption for loan which I took.
Please advise
Thanks,
Dhanesh
Arniv Sharda
(CA Final)
(3006 Points)
Replied 26 October 2011
U CAN GIFT IT TO UR WIFE BUT STILL U WILL BE TREATED AS DEEMED OWNER
CORRECT ME IF M WRONG
CHEERS
Nitesh Matta
(Nothing)
(198 Points)
Replied 26 October 2011
yup if u gift it to ur wife without any ample consideration it will be taxable in ur hand.. so u can not do this. :)
Rahul Suneja
(CA-Final, CS-Exec)
(215 Points)
Replied 26 October 2011
If u do such thing clubbing provisions shall be applicable and the income of your wife shall be taxed in your hands
khanna
(CA FINAL ICWAI FINAL)
(283 Points)
Replied 26 October 2011
YES INCOME WILL BE CLUBBED IN YOUR TOTAL INCOME ..
Rahul Gupta
(Chartered Accountant)
(644 Points)
Replied 26 October 2011
@ Dhanesh
I advise you not to gift the house to your wife. As already posted by other the clubbind provisions will attracted. Moreover you can't claim HRA even if the house is gifted.
However if you have only 1 house that you can claim the Principal & Interest Payment u/s 80C and Under the head House Property respectively.
But you can claim all these if you don't gift the house. However whatever the principal amount paid on house loan will be deducted u/s 80C subject to the maximum limit of Rs. 1 Lac and the interest payment will be deducted under the head Income from House Property. The head House property will show the loss and this loss will get set off against the income from other heads.
Nabeel
(CA)
(3288 Points)
Replied 26 October 2011
| Originally posted by : Rahul Gupta | ||
 |
@ Dhanesh I advise you not to gift the house to your wife. As already posted by other the clubbind provisions will attracted. Moreover you can't claim HRA even if the house is gifted. However if you have only 1 house that you can claim the Principal & Interest Payment u/s 80C and Under the head House Property respectively. But you can claim all these if you don't gift the house. However whatever the principal amount paid on house loan will be deducted u/s 80C subject to the maximum limit of1 Lac and the interest payment will be deducted under the head Income from House Property. The head House property will show the loss and this loss will get set off against the income from other heads. |
 |
Ganesh Kamath
(Asst Manager - Finance)
(28 Points)
Replied 28 October 2011
john
(LEARNER)
(549 Points)
Replied 29 October 2011
Nuances of home loan tax benefits and HRA exemption
jit, currently employed with Company A, is staying in a rented apartment in Mumbai and has bought himself a property in Chennai for which he has taken a home loan.
He finds himself in a dilemma while filing tax returns - "Can I claim both HRA and home loan benefits?" This seems to be a confusing factor for most tax payers. When Ajit pays rent, under the Income tax act, he is definitely allowed to claim both HRA and home loan benefits (interest payment and principal repayment).
Let us evaluate various possible situations an individual can find himself in and understand what the income tax act permits him to do.
You live in your own house
You have taken a home loan and residing in the house purchased with it. Since you are residing in your own house, you will not be able to claim HRA. However, you will be able to claim tax benefits on both, the principal and interest repaid on the home loan.
You own a house in another city
This situation was the one faced by Ajit. He resided in Mumbai but had bought an apartment in Chennai taking a home loan. Ajit will be entitled to HRA exemption and tax benefits on both, the principal and interest repaid on the home loan.
Your house cannot be occupied at this point (e.g. under construction)
You have bought a house in Mumbai taking a home loan and you're currently living in Mumbai in a rented apartment because the house is under construction. In such a case, you are eligible to claim HRA.
In the case of tax breaks on the home loan, you can claim tax benefits only for your principal before the completion of your house. Once your house is completed, you can claim tax benefits on the total interest paid upto the date of completion in five equal installments in five years begining from the year of completion.
You have a house which is ready for occupation but you cannot reside in it
You have bought a house in Delhi taking a home loan and now you aren't residing in it but are living in a rented apartment in Delhi itself for genuine reasons e.g. the house that you have bought is far away from your office. In such cases, the Income tax act permits the individual to claim HRA and home loan benefits which includes both principal and interest repaid on the home loan.
Also, please note that if your house remains vacant, then you will still need to pay tax on a notional rent income.
You have rented your own house and currently residing in a rented house
You took a home loan and your house is now ready for occupation. You have rented the same out while you reside in a rented house. The Income tax act allows you to claim both HRA and home loan benefits. However, in such a case, since you are the recipient of rent because you have let out your own house, that income is taxable at your hands and will be accounted for under "income from other sources".
The Income Tax Act treats HRA and home loan deductions under separate sections independently. The two are not interconnected to each other.
HRA is dealt with in section 10(13A) Rule 2A while home loans are entitled for tax benefits under section 80C (tax benefit on principal repayment) and Section 24 (tax benefit on interest payment) of the Income Tax Act. Hence, feel free to avail both tax benefits accordingly.
Now, that we have dealt with all possible situations with regard to availing HRA and home loan tax benefits, let's take Ajit's situation as an example to help you figure out how to avail them.
Claiming tax benefits on a home loan:
Ajit had purchased an apartment in Chennai for38 L three years back. He took a home loan of32 L to fund this house purchase. So far, this year he has repaid an interest of3.3 L and a principal amount of60,000.
Section 80C offers tax rebate on home loans upto a limit of1 lakh and Section 24 on interest upto a limit of1.5 lakh.
So, Ajit can utilize upto Rs.1.5L on his interest paid and avail the tax benefits in full for the amount paid towards principal.
Calculating tax benefits on HRA : Ajit earns a basic salary of40,000 per month and has rented an apartment in Mumbai for20,000 per month (he is eligible for 50% of the basic pay for HRA exemption, as he resides in a metro). The actual HRA he receives is25,000.
These values are considered to find out his HRA tax exemption:
a. Actual HRA allowance from the employer, i.e.25,000,
b. 50% of the basic salary as he resides in a metro (else 40%), i.e.20,000, and
c. The actual rent he pays for the house from which 10% of his basic pay is deducted, i.e.20,000 -4,000 =16,000
The value considered for his actual HRA exemption will be the least value of the above figures. Hence, the taxable HRA amount for Ajit per month will be25,000 - 16,000 (available HRA deduction) =9,000.
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
CAclubindia
