Deduction Of Interest Under Section 24b Also Applicable On Commercial Property

Under Section 24b of the Income-tax Act, 1961, a person is entitled to claim interest paid on the money borrowed for the purpose of buying a property, income where of is taxable under the head ‘income from house property’.

Do note that the interest deduction available under Section 24b is not restricted to residential house property only. However, the benefits of principal repayment under Section 80C is only available in respect of residential house property and thus cannot be claimed in respect of commercial property.

You can start claiming the interest paid on the loan from the year in which you have taken the possession. There is restriction up to Rs. 2 lakh of loss under the house property head which can be set-off against other income during the year and the loss not so set-off during the current year can be carried forward for eight subsequent years which can be set-off against house property income only

According to the income tax provisions, any sum of money received from a relative as gift is exempt from tax. The term relative has also been defined in the Income-tax Act, 1961, and son is one of the relatives included in the definition. So, the sum gifted to you by your son shall not be treated as income in your hands. However, the income earned from investment of such gifted sum shall be taxable in your hands.

Do note that you may be asked by the tax officer to explain the receipt of gift for which you will, then, have to explain and/or give complete details. The tax officer may also ask your son to explain source of the funds gifted to you.

Any transfer of asset to spouse, without adequate consideration, attracts clubbing provisions. The income arising to the spouse from the asset gifted is required to be added to the income of the transferor spouse.

In view of the same, the interest income, arising from investment made by your wife in the fixed deposit, out of the gifted money, shall be clubbed with your income. The clubbing provisions will apply till the relationship of husband and wife continues. The clubbing will apply on subsequent conversions from one form of asset to another form of asset.

Do note that the clubbing provisions apply only on the income relatable to the asset transferred and not on the income so generated and reinvested. So, if your wife re-invests the interest income in any other income-bearing instrument and earns income from that, the second generation of income shall not be subject to clubbing, and will be taxable in her hands only. Do note that there is no tax incidence at the time of receipt of the gifts, as any gift received from a relative, including spouse, is not to be treated as income.