Summary of this article
Interest on home loan from spouse is deductible under Section 24.
Tuition fees abroad are not eligible for Section 80C deduction.
LTCG exemption available only if gains reinvested in residential property.
I am planning to borrow from my wife to buy a house for our occupation. Is the interest amount payable to the wife deductible under Section 24 of the Income-tax Act, 1961? Are there any restrictions on the rate of interest? Whether formal stamped or registered agreement is required for taking such loan?
Under Section 24 (b) of the Income-tax Act, 1961, you can claim deduction for interest on loan taken for buying, constructing, or for repairs and renovation of your house. Such a loan can be taken from anybody, including your relatives. So, interest on loan taken from your wife will be available for deduction under Section 24.
There are no explicit conditions as to the rate of interest under the income tax laws. However, the rate of interest should be reasonable. You also need to obtain and keep a certificate from the lender for interest paid as the same may be required by the assessing officer if your case is selected for detailed scrutiny. There is no requirement to enter into any format written agreement, but you need to obtain a certificate from the lender specifying the amount of interest in respect of such loan every year. You should also be able to prove that the money so borrowed was indeed used for the purpose of buying your house.
Please note that this deduction for interest payment under Section 24(b) for self-occupied property is available only if you opt for the old tax regime.
I have paid a fee of Rs 2 lakh for my son’s college education. He is studying in the US. My company is not ready to give me any tax benefit while deducting tax at source (TDS) from my salary on this
Under Section 80 C of the Income-tax Act, 1961, an individual can claim deduction for tuition fee paid to any college, school, university or educational institution in respect of maximum of two children. However, the education institution should be situated in India and the course undertaken should be a full-time one. The maximum deduction which can be claimed is restricted to Rs. 1.50 lakh and that too if you opt for the old tax regime. Since you have paid the fee for a college which is situated outside India, no deduction is admissible under Section 80 C. Your company is justified in refusing you the benefit of deduction under Section 80C.
I want to sell my ownership residential house, purchased in 2012, to buy business premises. Will I still be liable to pay capital gains tax or is there a way out. I have another flat in my wife’s name for residing.
Since you have held the house for more than 24 month, the profits would be treated as long-term capital gains (LTCG). The exemption for LTCG under Section 54 on sale of residential house property is available only if the capital gains are invested in a residential property. No such tax exemption is available for purchase of a commercial property.
It seems you do not want to invest in residential property. In that case, you can claim exemption under section 54EC by investing the LTCG in bonds of specified institutions, such as REC, NHAI, PFC, RFC within six months of sale of such house property. You are required to invest only the capital gains and not the entire sale consideration. You can invest a maximum of Rs 50 lakh in one financial year. The restriction of Rs 50 lakh applies for claiming exemption from long term capital gains for one year from sale of land and building.
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.)
