You Cannot Claim Deduction For Life Insurance Premium Paid Against Long-Term Capital Gains

I am paying Rs 56,000 every year as a life insurance premium for my life insurance policies. I have earned some long capital gains on debt funds during the year. My other income is below the taxable limit. Can I claim a deduction under Section 80 C regarding the life insurance premium I paid against such long-term capital gains?  

Section 112 of the income tax Act, which deals with the taxation of long-term capital gains, specifically provides that no deduction is available under chapter VIA, including under section 80 C against the taxable long-term capital gains. So you will not be able to claim a deduction in respect of the life insurance premium paid by you against long-term capital gains but it can be claimed against your other income as long as it is positive. However, you can set off the taxable long-term capital gains against a shortfall in your basic exemption limit, provided you are a resident taxpayer.

We plan to purchase a residential flat from a builder for Rs 1 crore. Are TDS provisions applicable if the property is purchased in the name of four co-owners?

As per the provisions of tax deducted at source (TDS) on the purchase of immovable property, the buyer has to deduct tax at 1 per cent on the higher of sale consideration as stated in the agreement, or the stamp duty value of the property is Rs 50 lakh or more. So the liability to deduct tax arises if the total value of the property is 50 lakh or more, irrespective of the number of joint buyers. In the case of joint buyers, every joint owner has to deduct tax on the amount he paid for the property. So, all four joint owners will have to deduct tax even if the individual share of each joint owner does not exceed the threshold of Rs 50 lakh because the sale consideration of the property exceeds the threshold of Rs 50 lakh. 

I want to sell my residential plot for Rs 30 lakh bought one year back for Rs 25 lakh. I have a running home loan on my present house. Can I claim any tax benefits if I use the funds to pay off the home loan? If not, what are other ways to save tax on this profit of Rs 5 lakh? Please advise.   

No tax benefits are available regarding capital gains if the money is used to prepay an existing home loan except to the extent available under section 80 C for repayment of the principal amount of the home loan taken for a residential house up to Rs 1.5 lakh every year. This includes other items like provident fund contributions, equity-linked savings scheme (ELSS), life insurance premiums, tuition fees, Public Provident Fund (PPF), etc. 
Since you are selling the plot after holding it for less than 24 months, the profits of Rs 5 lakh shall be treated as short-term capital gains. No exemptions are available regarding short-term capital gains under income tax laws. The short-term capital gains so earned are added to your regular income, and you will have to pay tax at the slab rate applicable to you on such short-term capital gains. I would advise you to hold the plot for at least 24 months to become a long-term capital asset, and the profit made gets treated as long-term capital gains. 

Regarding long-term gains on plot sales, you have only two options to save tax. Under the first option available under Section 54F, you will have to invest the sale proceeds to purchase or construct a residential house within a specified period. If a lesser amount is invested, the exemption available will be reduced proportionately. Under the other option, you will have to invest the indexed long-term capital gains in capital bonds of specified financial institutions like the National Highway Authority of India, Rural electrification Corporation, etc., within six months from the plot's sale date. Please note that even if you sell the plot after 36 months, you cannot claim any tax exemption on your home loan repayment.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.).