You Can Claim Tax Benefit For Home Loan Repayment Only Upon Possession Of House

Last year, my husband and I booked an under construction property for which we have taken a home loan. We have started paying the pre-equated monthly instalment (EMI) interest. The possession is expected after two years. Can I claim tax deduction for this interest now or do I have to wait till the house is completed?

Answer: The tax benefit for home loan, whether for repayment of principal amount under Section 80C of the Income-tax Act, 1961, or for interest under Section 24(b) can only be claimed from the year in which the construction is completed and is possession taken thereof.  

Since you have to yet receive the possession, you cannot claim deduction for interest paid till the year in which you get the possession.  

From the year in which you get the possession, you can claim one-fifth of the aggregate of interest paid during the years prior to the year of possession along with the interest paid during the year.  Do note that no deduction can be claimed under Section 80C in respect of principal repayment made prior to the year of possession. 

Can I claim exemption from long-term capital gains (LTCG) on sale of plot of land by repaying the outstanding amount of home loan taken for buying a residential house five years back.  

Answer: You can save tax on LTCG on sale of a plot of land by either investing in a residential house, or, in capital gains bonds of specified financial institutions within the prescribed period.  

There is no provision for tax exemption for LTCG if you repay the home loan taken for a residential house. However, you will be able to claim deduction under Section 80C in respect of the home loan repaid during the year along with other eligible items upto Rs. 1.50 lakh.

I received a gift of Rs 75,000 in cash each from my father, mother and my father’s brother last year. Is anyone liable to pay tax on this transaction?  

Answer: Since the Gift Tax Act has been abolished, the donor is not subject to any gift tax. So your parents and uncle are not liable to pay any tax in respect of gifts made by them.  

However, under Section 56(2)(x) of the Income-tax Act, 1961, if aggregate of all the gifts received by a recipient during the financial year exceeds Rs 50,000 the same is treated as income of the recipient and the recipient of gift is liable to pay tax on the gifts received.  

There are certain exceptions to this general rule of taxation of gifts in the hands of recipients. Gifts received from certain specified relatives, including parents and uncle are not treated as income.  

So there is no tax implication for any of you in respect of the gift transactions as enumerated by you.  

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.)