I sold a residential house, bought it in 2015, during the last financial year and earned Rs 40 lakh in net profits. With the Rs 20 lakhs long-term capital gain, I am planning to invest Rs 20 lakhs in capital gains bonds of NHAI and use the remaining Rs 20 lakhs for buying a residential house property. The property will cost me Rs 50 lakhs. I will pay Rs 20 lakhs as margin money and fund the balance Rs 30 lakhs through a home loan. Will I be eligible to claim an exemption in respect of Rs. 20 lakhs paid as margin money for the residential house?
I presume you are referring to unindexed long-term capital gains of Rs. 40 lakhs. The exemption with respect to long-term capital gains arising from the sale of a residential house is available if another residential house is purchased within the prescribed time period. The exemption is available with respect to the cost of the house, irrespective of the source of the funds for the same. Since the house cost is more than the long-term capital gains earned, you need not invest in the capital gains bonds of NHAI (National Highway Authority of India). In case you are not able to utilise the full long-term capital gains by the due date of filing of the ITR, you need to deposit the unutilised long-term capital gain in the bank account under the capital gains account scheme before the due date of filing of the income tax return i.e., September 15 2025.
I understand that the bank interest up to Rs 10,000 is not taxable. Does it include both savings bank account interest and FD interest?
You are allowed a deduction of up to Rs. 10,000/- for interest received on savings bank accounts maintained with a bank, including a cooperative bank and a post office, under Section 80 TTA. This deduction is available to individuals and HUFs only on savings bank account interest and is not available in respect of any interest earned by you on fixed deposits with banks, post office, etc.
In case you are a senior citizen a higher deduction of up to Rs. 50,000/- is available which even includes interest on fixed deposits also. Both these deductions are available only if you opt for old tax regime. No deduction is available under the new tax regime.
I have a running housing loan from ICICI Bank. I have been claiming income tax benefit on both principle and interest for past four years. If I take fresh loan from the same bank for repair and alteration, will the interest portion of new loan eligible for the Income tax benefit?
If the loan is used for repair, renewal or reconstruction of the house property, the interest payable on such a loan is eligible for deduction under Section 24(b). If the house is self-occupied, the total of deduction in respect of interest on both the loans, one for buying the house and the other for renovation taken together, shall be allowed only up to Rs. 2 lakhs under the old tax regime. If you opt for the new tax regime, no deduction under Section 24(b) is available.
In case the property is let out, full interest in respect of both the loans shall be available for tax deduction under Section 24(b) under the old tax regime, but loss only up to Rs. 2 lakhs under the house property head is allowed to be set off against other income during the year. If you opt for the new tax regime, your claim for interest will be restricted to net taxable rent received, as no loss under house property is allowed to be set off against other income under the new tax regime.
Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.
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