`2L relief is all inclusive

QI was told that the interest paid against housing loan repayment for a property under construction can be claimed in five equal installments for income-tax benefit in the FY immediately after possession of the property. Does it mean this interest would be considered in addition to the interest being paid in that year? What if the total interest exceeds `2 lakh which is the limit of interest that can be claimed? J. PRATYUSHA Via mail

A) Interest payable by an assessee in respect of funds borrowed for the acquisition or construction of a house property and pertaining to the period prior to the previous year in which such property has been acquired or constructed (to the extent it is not allowed as a deduction under any other provision of the Act) is deducted in five equal annual installments commencing from the previous year in which the house is acquired or constructed.

However, the interest amount allowable for the preconstruction period is also included in the overall ceiling of `2 lakh applicable for payment of interest in case of a self-occupied house.

QReplying to a query on April 29, on gift tax (Section 56(2)(x)), you said that a brother or a sister of either parents of the individual could be considered as a relative under the Income-Tax Act. So could a nephew be a relative under this definition? Can the land be gifted without tax implications? I had faced a similar situation this year and my CA said being a direct nephew, I would be exempt from tax implications.

DR DEEPU CHUNDRU

Via mail

A) As per Section 56(2)(x) of the Income Tax Act, where any person receives, in any previous year, from any person or persons being a relative, any immovable property without consideration will be treated as exempt.

The definition of relative includes In case of an individual

(A) spouse of the individual;

(B) brother or sister of the individual;

(C) brother or sister of the spouse of the individual;

(D) brother or sister of either of the parents of the individual;

(E) any lineal ascendant or descendant of the individual;

(F) any lineal ascendant or descendant of the spouse of the individual;

(G) spouse of the person referred to in items (B) to (F); and

In the instant case, as the beneficiary is the nephew i.e., either the children of the brother or sister of the individual or spouse of the individual. Any sum given to the nephew would not be taxable in his hands and would be exempted as per the above definition. However, any amount received as a gift during a financial year from any person who is not a relative will not be taxable in his hands if the aggregate amount does not exceed `50,000. Further, if the aggregate amount received from non-relatives exceeds `50,000, then the entire amount becomes taxable and has to be included under the head “Income from other sources”.

Interest amount allowable for the pre-construction period is also included in the overall ceiling of `2 lakh applicable for payment of interest in case of a self-occupied house.