Saturday January 3, 02:34 AM

Source: Indian Express Finance

Residential status immaterial for taxability

By Vishal CHOPRA
• I am repaying the housing loan from LIC. The property is in my mom s name. I am a joint applicant of the loan. Primary applicant is my dad. Second applicant is me. Third applicant and fourth applicants are my brother and mom. Mom is a housewife and brother is an NRI. He is a retired person. I am repaying it for more than three years now. Can I get tax evasion for this loan? Praveen B, Instructional Designer (via Email) In order to claim the deduction (not evasion ; that is illegal!) on account of repayment of home loan, you need to satisfy the following three conditions: • You should be the owner/co-owner of the house property; • You should be the applicant/co-applicant to the home loan; and • You should be contributing to the repayment of the home loan Since you do not satisfy the first condition, you cannot claim deduction on account of the home loan repayment. • I purchased a house in my wife s name last year. She does not have any income of her own and is a homemaker. I did not opt for co-ownership as she was entitled to lower registration amount as per the local laws. However, I am a co-applicant to the home loan and have been fully servicing the loan since its inception. The house was initially intended for our own residence but since I have been selected for an overseas assignment that would last for at least two years, we intend to put it out on rent. I understand that since the funds invested in the property are mine, the income from the property will also be taxable in my hands. However, I would like to know how to channel the rental income so that its ownership would rest solely with my wife after the taxation. I would require the arrangement for the future so that she may use the income to build her own asset. K Shah (via email) It is true that the income arising from the property would be clubbed in your hands and taxed accordingly. However, once this income (which arises from the property that is registered in your wife s name) is taxed in your hands, the ownership of the income post-tax would rest with your wife and not you. The income tax law clubs the income from the asset in your hands, but after taxation the ownership shall vest with the person in whose name the income is earned. Your wife may invest the funds wherever she feels like and earn income out of it. In other words, the income from income will be taxable in her hands and not yours. I hope you are aware of the provisions of taxation applicable in your case, since you are leaving for an overseas assignment and your status would soon change to a non-resident. Do remember that your residential status would be immaterial for the taxability of the rental income, which would in any case be taxable in your hands in India as it is an income arising in India. • I have read in your column that a person having rental income from a residential house is allowed a standard deduction from the rent that he receives during the year. As far as I know, the concept of standard deduction was done away with a couple of years back. Could you please clarify the concept as stated in your advices, preferably with some legal supporting? Bhushan (via email) The concept of standard deduction that has been done away with was in the case of income from salaries. The standard deduction that I talk about still exists in the case of income from house property. The standard deduction available in the case of income from house property equals 30 per cent of the annual value of the property. The annual value in turn broadly means the rental income from the property less any municipal taxes paid by the owner for the property in question. For more on the subject and to understand the leagalities you may kindly refer to section 24 of the Income tax Act, 1961. Confused about the various types of home loans on offer? Stumped by tax issues? Ask the expert. Send in your queries to: estatesqueries@gmail.com