Tax Benefit On Home Loan On Under-Construction Property Can Be Claimed Only After Possession

I stay in a rented accommodation in Chennai. I have also booked a property in Mumbai, which is under construction. Can I claim house rent allowance (HRA) benefit and also the tax benefits for home loan interest and repayment of the home loan, as I have started paying my equated monthly instalments (EMIs) for the under-construction property?  

Answer: The basic condition for claiming HRA deduction is that you should be paying rent for the property occupied by you and which is not owned by you. Since you fulfil both these conditions, you can legitimately claim the HRA deduction.  

As far as claiming tax benefit for an under-construction property for interest and principal repayment of home loan is concerned, the same is available from the year in which he house is completed and possession is obtained. Therefore, you cannot claim any tax benefit in respect of the under-construction till the year in which you obtain the possession. 

Also note that interest paid during the construction period which is called pre-EMI interest may be claimed in five equal instalments beginning from the year in which the house is completed and possession is obtained. Also, the aggregate of claim for pre-EMI interest and the interest paid on the loan during the year of possession cannot exceed Rs 2 lakh for self-occupied property. 

Also remember that neither the home loan benefit for self-occupied house property nor HRA benefits are available under the new tax regime.  

Can I gift Rs 50,000 each to my son-in-law and daughter-in-law in a single day? If so, is there any tax liability on the donee or donor? 

Answer: There is no restrictions as to the number of gifts one can make in a day as long as the amount of each gift does not exceed Rs 2 lakh. 

Also, gifts made to specified relatives, including son-in-law and daughter-in-law are not treated as income for the recipient. There is no tax liability on the donor as well for gifts made to any person under the Indian tax laws, as it is the recipient who has to pay tax on gifts received if the aggregate value of gifts received from all sources during the financial year exceeds Rs 50,000. 

In this specific case, neither you nor your son-in-law and daughter-in-law will have any tax implications for the gifts made by you. However, for gifts made to your daughter-in-law the clubbing provisions will apply and any income earned by her on the amount gifted to her will be included in your total income under provisions of Section 64 of the Income-tax Act, 1961, till the relationship subsists. 

I pay a premium of Rs 45,000 on health insurance for all our family members, but I am able to claim a deduction for Rs 25,000 only. I file my income tax return (ITR) as a Hindu Undivided Family (HUF) for myself and my wife. How can I claim the balance premium of Rs, 20,000?  

Answer: The deduction under Section 80D in respect of health insurance premium, including preventive health check-up is restricted to Rs. 25,000. So, in order to claim the tax benefits for balance premium of Rs 20,000, you can pay the premium for some of the members from the bank account of your spouse or your HUF depending on where you will get the higher tax benefits based on the marginal rate of tax applicable.  

Please note that an HUF is also entitled to deduction under Section 80D for payments made for a health insurance policy for any member of the HUF.  

The author is a tax and investment expert and can be reached on jainbalwant@gmail.com 

(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.)