I have sold my flat after 20 years. It was in joint names. Can each one of the joint seller buy one new residential flat to claim exemption from long term capital gains?
Section 26 of the Income Tax Act specifically provides that in respect of jointly owned property, each of the joint owners shall be deemed to be the owner of that part of the property, so if the property sold was jointly owned, then each joint holder will be able to claim exemption from long term capital gains by investing the long term capital gains in a new residential house within two years from the date of sale. In case you tax go for self-construction of a residential house or book an under-construction property, you get an extended period of three years from the date of sale of the property. Amount of capital gains not utilised by the due date of filing of the ITR has to be deposited in the capital gains account under the capital gains account scheme with a bank by the due date of filing of the ITR and which can be utilised within the prescribed time period for making payment for the house property. They need not buy the property again in joint names, and the same can be bought in their individual names.
I have purchased a residential house jointly with my wife by taking a joint home loan, but I am solely repaying the loan, as my wife is a homemaker and has no source of income. We have let out this house at Rs. 10,000 per month. The rental income is credited to my wife's account. Meanwhile, we have moved into a rented house for which we are paying Rs. 15,000 per month as rent. I would like to know how I can save the maximum possible on income tax in this situation and what the HRA exemption is.
Firstly, it is apparent that the house was bought with your money, and you also serviced the home loan. So you alone are the beneficial owner of the house and the rental income should have been taken in your bank account and not in your wife's account even if her name is added as a joint owner in the sale agreement. This is patently wrong and not as per the law. Please show the rental income in your ITR for F. Y. 24-25 and take the rental income in your bank account henceforth.
Against the rental income, you will get a standard deduction of 30 per cent in addition to the interest payment being made for the home loan. If you opt for the old tax regime, you will be able to claim full interest against rental income. However, loss under the house property is allowed to be set off against other income up to Rs. 2 lakhs every year, and the loss not set off shall be carried forward for set off in eight subsequent years.
If you opt for the new tax regime, you will be able to claim interest paid on the home loan to the extent of taxable rent, as the loss under the house property head is not allowed to be set off against other income under the new tax regime.
As far as the benefits of HRA are concerned, this is available only if you opt for the old tax regime. You can claim HRA benefits if you are paying rent for a property which is occupied by your and is not owned by you even if you own any other house. The amount of HRA exemption is available least of the following.
1. 50 per cent of basic salary in case you are staying in a metro city else 40 per cent of the basic salary
2. Excess of rent paid over 10 per cent of basic salary
3. Amount of actual HRA received
Without details of your HRA and amount of your basic salary I can not specify the exact amount of HRA exemption available to you.
Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com
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