Q. A friend of mine, who is a professional, with his mother’s permission demolished her old house and constructed a new house and building with savings and borrowings from a financial institution. He wants to claim deduction u/s 24 for payment of interest to the financial institution and principal u/s 80C paid through EMI. The land belongs to his mother. Please advise.
R. Venkataramani
A. Under the Income Tax Act, charging section under income from house property is triggered only when the assessee is the owner of the property consisting of any building or land appurtenant thereto. In your case, though the building was built by you using your funds and borrowed funds, you are not the owner of the house property and section 24 on“interest deductions” shall not be triggered. Therefore, interest and principal cannot be claimed unless you are the owner of the property at the time of construction.
Q. I am investing ₹60,000 a year under NPS voluntarily. Can I claim this amount under Sec. 80 CCD (1B) for tax relief? I have exhausted 80C benefit of ₹1.5 lakh through other means ( PF, PPF, home loan principal).
J. Sree Harsha
A. Under 80CCD(1B) of the Income Tax Act, any individual making a voluntary contribution to the prescribed pension fund/scheme shall be allowed deduction up to ₹50,000; this is in addition to the deduction the assessee can claim through the contribution made by the employer towards NPS under Section 80CCD(2). This deduction is available up to 10% of the salary; in your case, additional deduction of up to ₹50,000 over and above ₹1,50,000 under 80C can be availed.
Q. I am a senior citizen having a combined medical insurance policy with my wife. She is 58 years old. My auditor says I am eligible for a deduction of ₹25,000 only as my wife is not a senior citizen. He explains if both are senior citizens, only I am eligible for ₹50,000. (My wife is also an assessee but not claiming any deduction under Sec. 80 D)
R. Devaraju
Q. I am a senior citizen, 75 years old. I have taken medical policies for myself, my wife and also for my daughter. Both my daughter and my wife are with me and are dependent on me. The total annual premium I pay is about ₹50,000. Can I claim the maximum amount u/s 80D of ₹50,000?
A. Kripanidhi
(Reply to the above 2 queries)
A. Under section 80D of the Income Tax Act, for senior citizens, in respect of amounts paid towards medical insurance, an amount of up to ₹50,000 can be availed as deduction for self and family. Family includes non-senior citizens also.
Q. My wife and I are senior citizens and our son is in the U.S. Here go my details:
(1) I sold my residential property in Chennai last year. I have not invested anything in bonds within the prescribed period of six months. (b) Not planning to buy a new flat due to our age. I request you to let me know whether any safe scheme is available now for investment
A. In order to reduce any long-term capital gains tax arising from sale of house property, the proceeds from such sale must be invested in any/all avenues as mentioned below
1. Investment in prescribed bonds to be done within six months, of up to ₹50 lakh (not eligible in your case).
2. Investment in any other house property with certain conditions. (however you are not keen on the same)
3. The other option is investment in a newly-incorporated company with several conditions (this also may not be suitable to you as the return of the investment is dependent on various uncontrollable factors).
Apart from the above mentioned modes, there are no exemptions under income tax to reduce capital gains tax.
(The author is partner, GSS Associates, Chartered Accountants, Chennai. The above queries were answered before presentation of the Union Budget on February 1)
