I have taken a home loan for which I am taking the tax benefits of principal and interest paid. I am a salaried person working in a government department. HRA is being paid to me. I am residing in a rented accommodation. Now, my question is that if I can avail the benefit of HRA rebate as I am living in rented house. If yes, who should I apply to for the same? Is rebate on principal and interest paid on home loan as well as HRA rebate be claimed simultaneously? Please provide authority for the same.
—Jatinder The tax benefits in respect of HRA and interest on home loan are contained in two independent provisions of the income tax laws. The benefit in respect of interest on home loan is contained in Section 24(b). For availing deduction in respect of interest on home loan what is required is that
a) You should be owner of the house
b)You should have borrowed money to construct or purchase the house and
c)You should be in possession of the house. So you can claim the interest if you satisfy all the three conditions. The quantum of deduction will depend on whether the property is selfoccupied or is let out.
The provisions for tax ben- efits in respect of HRA are contained in Section 10(13A). For availing HRA benefits what is required is that
a)You are in receipt of HRA from your employer
b)You are paying rent for a house that is occupied by you and
c)You do not own the accommodation. So the provision of Section 10( 13A) do not talk about owning any property, it only talks about owning the property in respect of which you are paying the rent.
In case you satisfy all these conditions you can claim HRA benefits. The tax benefits available, therefore, are completely separate and are not dependent on each other.
In my opinion you need not have any legal authority for claiming both the benefits as long as you satisfy both sets of conditions cumulatively and the legal provisions are amply clear I have booked a flat in a golf city project and paid 20% of the project cost as per the 20/80 scheme. The 80% loan has been disbursed by the finance company to the builder but I have to start repaying the loan from next year. Can I sell the flat at this stage by just paying 20%? Can the loan get transferred to the purchaser of the flat? Can I sell the flat without getting it registered at this stage? What will be the tax implications/ liability on my part? Tax liability if any will be short term or long term and the amount? How much money will I receive assuming the flat cost is ` 5 lakh and 20% paid by me is ` 1 lakh and today’s cost is ` 6 lakh? What is the amount of transfer fees I will have to pay on selling the flat and to whom will I have to pay it? Will TDS come into effect on this transaction?
—MK Tripathi You cannot sell the property without the consent of the lender as they have already disbursed the loan amount to the builder. Second, the sale will also depend on the terms and conditions imposed by the builder in the sale agreement.
There is no such thing as transfer of loan. You will have to foreclose the existing home loan to be able to sell the property and the buyer will have to apply for a fresh loan on the basis of his eligibility.
It is not possible for your purchaser to get loan amount disbursed by the lender without the registration of the property. It is surprising that the home finance company has disbursed the loan without registration of the flat in your favour.
In case you are selling the under-construction property within a period of 36 months, the profits made on its sale will be treated as short term and will be taxed at the slab rate applicable to you. In case it is sold after 36 months, the gains will be long-term and will be taxed at flat rate of 20.36%. However, in case you sell the property after taking possession the period of 36 months will be counted from the date of you taking the possession and not from the date of booking of the flat.
You tax liability will be the difference between the cost price of the under construction flat and the price at which you will sell it. Harsh Roongta is CEO, Apna Paisa. He can be reached at firstname.lastname@example.org