The author is a tax and investment expert
An employee staying in his own house cannot claim HRA benefits. No deduction is available in respect of money borrowed for furnishing the house. Difference between cost of the units redeemed and the net asset value at which the units are redeemed will be treated as capital gains
My wife owns the property where we are staying. I am paying the rent to my wife by way of bank transfer. She is including this rent paid by me in her income tax return (ITR). Can I claim house rent allowance (HRA) towards the rent paid to her?
In order to claim HRA benefits, the law requires that you should be in receipt of HRA from your employer. It also requires that you are paying rent for the property occupied by you and which is not owned by you. So an employee staying in his own house is not entitled to claim HRA benefits. Likewise, if you are joint owner of the property, you cannot claim HRA benefit.
Though the law does not specifically bar payment of rent to close relatives, including spouse, but there is a high probability that the income tax department may treat this arrangement suspiciously for the sole purpose of evading tax, and so they may disallow you from claiming HRA. This could lead to a litigation. Thus, you weigh the cost of litigation and decide whether to enter into such transactions or not.
I had taken a home loan for the property where we are staying. I took a top-up loan on the same property for furnishing the house, after two years. Can I claim income tax benefit for both the loans?
In respect of a self-occupied property, one can claim deduction of up to Rs 2 lakh in respect of interest payable on money borrowed for acquiring, constructing, repairing, renewing or reconstructing the property.
However, no deduction is available in respect of money borrowed for the purpose of furnishing the house. So you will be able to claim deduction in respect of original home loan and not the top-up loan taken to furnish your house. Please note that in case you are opting for the new tax regime, you are not eligible to claim deduction in respect of interest even for the purchase, construction, renovation of the house if the house is self-occupied.
I sold my ancestral property, and after paying the long-term capital gains (LTCG), invested the balance Rs 1.70 crore in UTI Nifty Fifty index fund under the growth plan in April 2023. Now I have started a systematic withdrawal plan (SWP) of Rs 1 lakh every month starting from this month. The corpus has now grown to around Rs 2 crore. What is my tax liability for the Rs 1 lakh which I withdraw every month?
In respect of withdrawals through SWP from equity-oriented schemes, the difference between cost of the units redeemed and the net asset value (NAV) at which the units are redeemed will be treated as capital gains.
In respect of units redeemed which have not completed 12 months, the profit will be treated as short-term capital gains (STCG) and they will be taxed at a flat rate of 15 per cent. Once the investment completes one year, the difference between the NAV on the date of investments and withdrawal for SWP will be treated as LTCG.
Do note that LTCG in respect of listed shares and all equity-oriented schemes taken together are taxed at a flat rate of 10 per cent after the initial Rs 1 lakh, which is taxed at nil rate, and thus, effectively becomes tax-free in your hand.
The author is a tax and investment expert
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