I am in the process of taking home loan with my wife declared as the first applicant (as interest rate is lower if first applicant is a female) and me as the co-applicant. Property will be registered only in wife’s name. However, only my salary has been considered (because my wife is a housewife) while deciding loan eligibility and I only would be paying the EMIs. I just wanted to be sure that with me not being the first applicant would my tax benefits be affected? Could I still show (even when I am the co-applicant and not the first applicant) the following: 1) R1,00,000 of housing loan with a maximum limit under section 80C, and 2) R1,50,000 of interest on home loan under section 24. My wife is a housewife and the loan amount EMI will paid by me, so could I get the whole 100% of tax benefit?
—Hitesh Malik If you are not a owner or co-owner in the property then you will not be eligible for any tax benefit on the loan repayment and interest payments even though you may be a joint borrower and the loan might have been given based on your salary. This is the case even if it is fully being repaid by you. So make sure that you are a co-owner in the property if you wish to claim tax benefits. It does not matter whether your name is first or second as borrower. It would be advisable to enter into a small agreement with your spouse making clear that the beneficial ownership is in the ratio of contribution to the cost of the property. If you are contributing the entire down payment and the loan is entirely being repaid by you then you are 100% beneficial owner notwithstanding the fact that your wife’s name is first in the ownership document. In the quest to save some money on interest and/or stamp duty please don’t jeopardize your tax benefits. I have got my home loan sanctioned jointly with my wife this month for R25.50 lakh, can we get R2.5 lakh tax free on interest?
—Kishan Lal The benefit of enhanced tax benefit of interest on home loan as proposed in the budget is available to the persons whose loan is sanctioned between April 1, 2013 and March 31, 2014. Since your loan is already sanctioned you will not be able to avail of the benefit. Moreover, the benefit is available for loans up to R25 lakh where the value of the property does not exceed R40 lakh. You would not have been able to claim the benefit in any case. However, both you and your wife can separately claim deduction for interest payable on the loan in the proportion of the loan showed by both of you and that itself is likely to give you full benefit for deduction of interest. In 2003 I purchased a 1BHK flat at Kharigaon, Kalwa Thane, for R5,11,839. The sale agreement is dated May 5, 2003 and the possession date is February 24, 2006. I sold the flat on December 31, 2012, for R33 lakh. How much does one need to pay as capital gain tax or otherwise?
—Ashok Since you have held the capital asset for more than 36 months the capital gains arising on sale will be treated as long-term capital gains. The long-term capital gains will be calculated by reducing the indexed cost from the sale proceeds.
Since your purchase cost is R5,11,839 and since you had become the owner of the property in 2005-2006, the indexation benefit will be available to you from that year. The cost inflation index for that year was 497 and you sold this property on December 31, 2012, when the cost inflation index was 852; your indexed cost comes to R8,77,436. Based on your sale proceeds being R33 lakh, your long-term capital gains on the same would be R24,22,562 and your long-term capital gains tax at 20% would be R4,93,234 (including the education cess at 3%).