Norms for tax benefit on property in joint ownership in India
Property Outlook-v Nagarajan
Exclusive to The Gulf Today
I took home loan while buying an apartment in Bengaluru and also included my wife’s name for tax purposes. But the assessing officer has denied benefits on the ground that the entire amount was transferred by me. Please clarify. Purandar Shetty, Dubai.
The important thing while claiming double deduction is that the property should have been purchased in the name of both the family members. In your case you have just included your wife’s name without contribution from her side. Both of you should make investment in the proportion to your ownership ratio in the property.
You may make investment by loan or by investing savings or getting a gift from blood relatives. Only if you put proportionate share in the investment, will both of you be able to get deduction for interest on housing loan individually upto Rs200,000 per annum per person. Similarly for deduction for repayment of housing loan with other tax deductions as per section 80C, which are available upto Rs150,000.
While selling my property I have made capital gains recently. I would like to invest in bonds to claim capital gains exemption. Is there any monetary limit while investing in such bonds? Rathish, Sharjah.
Long-term capital gains, if invested within a period of six months after the date of property transfer, is exempt from tax if invested in specified bonds. Investment in bonds is limited to Rs5 million. In the event the bonds are transferred or redeemed within three years then the amount claimed as exempt under section 54EC, shall be deemed to be long-term capital gain of the previous year. If you take any loan or advance on the security of such bonds, you will be deemed to have converted such bonds into money on the date on which such loan or advance is taken. Interest earned on these bonds is taxable as income from other sources.
I own a plot of land and commercial property in Pune and planning to raise short-term funds by mortgaging the property. What is the procedure involved to mortgage to a financial institution? Please clarify. Anoop George, Dubai.
You can mortgage the land and commercial property without the need to obtain permission from any quarters. NRIS/PIOS can mortgage to an authorised dealer/housing finance institution in India without the approval of Reserve Bank. However, if you wish to mortgage the property to a party abroad then prior approval of the apex bank is required. Notes: Large institutional and logistics developers are betting big on the growing demand for warehousing in India either by forming joint ventures with local partners or by investing in the sector. There’s more than $2 billion waiting to be invested over the next few years in the Indian warehousing segment. Large foreign investors are eyeing more opportunities, according to Ascendas Firstspace sources.
The joint fund will develop 13-15 million sq ft of portfolio in the next five years, according to media sources.
Embassy Industrial Parks, a joint venture between Embassy Group and private equity firm Warburg Pincus, is also looking to invest $1 billion over the next five years. In 2015, Warburg Pincus and Embassy Group had together infused $250 million equity capital to build industrial and warehousing spaces across India.
Amid rising concerns on inadequate infrastructure to accommodate the rapid urbanisation of Indian cities, the growing foreign investor interests on infrastructure projects is a positive sign for the real estate sector in India. As per media sources, the infrastructure sector has witnessed 25 deals worth Rs 21,457 crore ($3.2 billion) YTD in 2018 against 42 contracts worth over Rs 30,845 crore ($4.6 billion) in 2017.
Investors such as Macquarie, Canada Pension Plan Investment Board (CPPIB), Alliance Capital Partners, Fairfax Holdings and Global Infrastructure Partners are showing a keen interest in infrastructure projects in India. Besides this, the central government is also giving infrastructure development as a top priority. In the union budget 2018-19, the government has allocated a total expenditure of about Rs5.97 lakh crore ($89 billion) for the FY 2018.
According to Ministry of Urban Development (MOUD), the urban population in India, which is nearly 377 million is poised to grow up to 600 million by 2030. This rapid urbanisation coupled with increasing residential and commercial developments has put severe pressure on existing infrastructure that had led to various problems such as traffic congestion and increased pollution, diluting the habitable quotient in the fast urbanising metro cities.
This, in turn, is adversely impacting the overall productivity of the country.
The increasing infrastructure spending by the government and rising foreign investments into the sector should help to reduce the infrastructure gaps in major Indian cities and create room for future population growth as well, according to Colliers International. THE AUTHOR IS A BUSINESS ANALYST COVERING INDIAN PROPERTY MARKET