Tax queries answered by Dilip Lakhani, Senior Chartered Accountant

I am a 45-year-old housewife from Mumbai. The interest received on bank FDs is my main source of income. I have recently moved into an accommodation and am paying Rs 45,000 a month as rent. I also receive Rs 25,000 a month as rent for my own flat. Can I claim any deductions from my taxable income on the rent paid by me or the rent received by me?
Deepa Kamat
The rental income from your own flat will be chargeable for tax under the head `Income from House Property'.The taxes levied by the local authority, which are actually paid by you, will be allowed as deduction from the rental income. You will also be allowed to claim deduction of a sum equal to 30% of the annual value (i.e., rental income as reduced by taxes paid) and no separate deduction will be available for rent paid by you in computing the income from house property.

I purchased a flat in Kalyan in 1983. It was under construction at the time of purchase and I got possession in August 1983 for Rs 76,800. I want to sell the flat now for Rs 28.25 lakh. We are purchasing a property in Pune and have taken housing loan for that. The loan account is in the name of my daughter-in-law, son, and me. I am not paying any loan installment. What is the tax liability on the proceeds from the sale of the flat as a part of the amount received would be used for part-payment of the loan?
CP Kulkarni
Based on the data provided by you, the chargeable long-term capital gains on the flat works out to Rs 20.80 lakh (sale consideration Rs 28.25 lakh less indexed cost Rs 7.45 lakh). It appears that you will purchase the new residential property in Pune in the joint name of yourself, your daughter-in-law and your son. You will have to identify your share in the new property and to the extent of your investments in the said residential property you will be eligible to claim deduction under section 54 of I-T Act, 1961.


If you purchase a new residential property by borrowing the amount from the bank and utilise the sale proceeds of the flat at Kalyan for repayment of the loan, then subject to satisfaction of the conditions of Section 54, you will be eligible to claim deduction and reduce your tax liability. I suggest that you should take a legal advice based on the actual facts and your share in the co-ownership property.

(Please send your queries on Tax to et.tax@timesgroup.com.)