Q&A: Tax

Vaibhav Sankla, Executive Director, Adroit Tax Services

Joint tax exemption

Me and my wife plan to purchase a plot and construct a home jointly. We plan to purchase the land through our savings and house through a bank loan. Can we both avail the tax exemption? Is the stamp duty paid for the plot available for exemption? Krishnakumar

Both can claim tax benefits on housing loan if both of you contribute to the EMIs payable to the bank/HFC. Further, the tax deductions can start only from the year in which the construction of the house is completed. Stamp duty payable on purchase of plot does not qualify for tax deduction under Section 80C.

Further, if you intend to use the property for self-occupation and the construction of the property is not completed within three years from the end of the year in which the loan is taken, the deduction on the account of interest will be restricted to 30,000.


Tax on property sale

My father, a senior citizen, intends to sell his property in Dehradun and buy a house in his own name in Delhi or NCR. Is there any long-term capital gain tax implication? Will he have to invest the whole money by selling this property into the new one? Samir Singh

I am assuming that the property he intends to sell is in the nature of a residential house and also that it was held by him for more than 36 months. Long-term capital gains arising from the sale would be liable for tax at 20.6%.

However, if he buys a house within two years from the date of sale of the house, he can claim exemption under Section 54. The amount of exemption would be lower than the cost of the new house and the amount of long-term capital gains.
If the new house is not purchased within the due date applicable to him for filing his tax return of the year in which the house is sold, he should deposit the amount of capital gains in an account in a nationalised bank maintained under the Capital Gains Tax Saving Scheme before such due date.

The amount in this account can then be utilised for making payment for the purchase of the new house. Lastly, you should avoid selling the newly-acquired house within three years from the date of its acquisition as doing so could result in additional tax liabilities.