Source : Money control :7 Dec 2011
Q1. I am owning one immovable property at Mumbai which is given on rent. I have to spend money on repairs but unfortunately I do not have full details of the bills etc. relating to repairs done by me to the building. Please inform me in the absence of such bills etc. and other documentary evidence whether I will be able to claim deduction in respect of repair expenditure to the house property which is given on rent.
Ans. Don’t worry at all, you will be entitled to deduction of expenses in respect of repair to the immovable property. Under the Income-tax Law in terms of section 24 you are entitled to get a deduction equal to 30 per cent of the annual value of the property by way of repair etc. etc. For claiming this deduction you are not required to maintain any record or details etc. Hence, in your case even if you are not possessing full proof or details of the expenditure incurred by you on repairs etc., still you will enjoy the tax deduction.
Q2. I am owner of a big property in Delhi. This property has been let out to very old tenants. I maintain meticulous proof in respect of the expenses on repair to the building. The main problem is that rent from the property is very small and repairs on the property is very high. Nearly 60 per cent of the amount of rent collected is spent away just by way of making payment for repairs to maintain the building. I will like to know whether I can get deduction from the rental income in respect of the expenses on repairs which is equivalent to 60 per cent of the rent receipt. I maintain that I should get this deduction from the rental income specially because I maintain meticulous details of each and every expenditure incurred on such repairs.
Ans. Even if you maintain full details in respect of the expenses incurred by you on repairs to the building, still you will not get deduction equal to 60 per cent of the rental amount which you have actually spent on repairing the building. Under the Income-tax Law the maximum and the minimum amount which is allowed as a deduction from the rental income is equal to 30 per cent of the annual value only. Hence, even when you are maintaining full details and vouchers and proof of having incurred heavy expenditure in your very old building, still as per the provisions existing in the Income-tax Law the maximum amount that will be allowed as a deduction to you will be equal to only 30 per cent.
Q3. For the year ending 31st March 2012 I will be required to make payment of Rs. 1,22,000 in respect of the interest on loan taken by me from the bank. However, due to very bad financial position I am not in a position to make payment of the interest this year. I will, however, make the payment of interest in subsequent year. My question is in such a situation where interest on housing loan has not actually been paid in the financial years whether in such a situation the deduction will be allowed of the interest payable by me.
Ans. Happy news for you, in spite of the fact that you have not made payment of the interest for the housing loan and your circumstances are such that you will not be able to make payment of the interest on loan, even then under the provisions as contained in the Income-tax Law together with clarifications issued by Central Board of Direct Taxes, the interest on loan for the house property will be allowed to you as a deduction even when the same is not actually paid by you.
Q4. I have a commercial property which is given on rent and the rental income is Rs. 1,80,000 per annum. I have taken loan against this property and I am required to make payment of interest equal to Rs. 2,50,000 during the year. Right now no house tax is payable in respect of this property. Please inform me how the tax liability will be calculated in respect of this rental income from commercial property in my case.
Ans. From your facts it is clear that you have not made payment of house tax because house tax is not applicable in your case as on today and from the gross rental amount of Rs.1,80,000 rupees deduct 30 per cent being the standard deduction for repair, collection charges etc., etc. Thus, the sum of Rs. 54,000 will be deducted towards this standard deduction from your rental income of Rs. 1,80,000 thereby the balance rental income will be Rs. 1,26,000. Now from this house property income of Rs. 1,24,000 you are entitled to get a deduction in respect of interest on loan taken for the property. As you are going to pay Rs. 2,50,000 interest on loan, so this amount will be deducted leaving a net negative balance of Rs. 1,24,000. This amount will be treated as loss from house property which will be adjusted against any income of the year.
Q5. I am owner of two residential properties one in New Delhi and the other in New Bombay. In one of the properties I stay with my wife while in another property my son stays there. Please inform the tax implications in respect of these properties which are standing in my name alone.
Ans. Under the Income-tax Law in respect of one self occupied house property there is no liability to income-tax at all. Now in your case you are occupying two residential properties. Hence, for one property there will be no tax liability but for the second property there will be a tax liability and this liability will be calculated based on the fair market value of the property if let out, hence deemed rental income will be added to your income in respect of the second house property which is self occupied by you.
Q6. If I take a loan for my residential house property I get a tax deduction equal to Rs. 1,50,000 by way of interest payment. I will like to know what would be the situation if I take this loan not from bank but from my close relatives and friends.
Ans. The deduction of Rs. 1,50,000 is allowed as a deduction whether you take the loan from the bank or you take the loan from any other person. Hence, in your case if you have taken loan for house property from friends and relatives, the entire interest payment up to maximum limit of Rs. 1,50,000 will be allowed as a deduction.
Q.7. I have applied for purchasing a flat in upcoming new colony in Gurgaon. Loan has also been sanctioned to me for this property. I have started making payment of the EMI. The possession of the property will be ready by July 2014. Please inform me how much deduction I will be able to claim in respect of the interest paid by me for this property.
Ans. On the facts stated by you, you will not get any deduction in respect of interest paid by you. This is mainly because of the fact that the house property has not yet been ready. Please remember that deduction in respect of interest will be allowed only when the house property is ready for use.
Q.8. I am owner of a big multistoreyed building which is given on rent to commercial establishments. Some of the tenants do not make payment of the rent in time while some tenants are not making payment of rent at all. Hence, I am required to file legal cases. In the current financial year I spent nearly Rs. 48,000 being the payment made to lawyers etc. for fighting legal case to recover the rent from the tenants. I will like to know how much of this amount will be allowed as a deduction.
Ans. No amount will be allowed as a deduction in respect of the legal expenses incurred by you for making payment to lawyers fees etc. This is mainly because of the fact that under the Income-tax Law only one single deduction equal to 30 per cent of the rental value is allowed as a deduction for taking care of repairs incurred for the property as well as taking care to realize the rent and other expenses if any. Hence, no expenditure by way of legal expenses will be allowed separately as a deduction to you.
Q.9. I have purchased two very small flats in one upcoming residential project coming up in Nagpur. The purpose of buying two flats is to ensure that ultimately my two sons inherit each of the flat. My question is that during the year ending 31st March 2012 I will lend up in making payment of total interest payment of Rs. 1,40,000 to the bank in respect of these two flats. I will like to know how much deduction will be allowed to me under the Income-tax Law, I understand that the entire amount will be allowed as a deduction to me because it is within the overall maximum limit of Rs. 1,50,000.
Ans. It is true that the maximum amount of interest on housing loan which is allowed as a tax deduction is Rs. 1,50,000 per annum. But actually in your case the amount which will be allowed as a deduction to you by way of interest on housing loan for residential house property will be Rs. 70,000 only because the deduction is allowed only for one house property and not two properties. Tax payers may kindly note that under the Income-tax Law the maximum amount which qualifies for a tax deduction in respect of interest on housing loan is Rs. 1,50,000 but restricted to one property only.
Q.10. I purchased a residential house property with a bank loan some 15 years ago. With God’s grace the loan has been repaid. But I now require a small loan amount to be taken from the bank for repairs of my existing house property. The interest on this loan which has been taken for the purpose of repair will come to nearly Rs. 95,000. Please inform the maximum amount that will be allowed as a deduction to me in my Income-tax Return.
Ans. In your Income-tax Return the maximum amount that will be allowed as a deduction will be only Rs. 30,000 being the interest on loan taken for a residential property for repairs of the property.
Q.11. I am a salaried employee deriving salary income and I have got only income from one house property and a small rental income. Please inform me for the Assessment Year 2011-12 which Income-tax Return Form should I file.
Ans. You should file your Income-tax Return in ITR1 popularly known as the SAHAJ Income-tax Return Form.
Q.12. I am a proprietor of my proprietorship concern doing in garments manufacturing. I have got a rental income also. Please inform me which Income-tax Return Form should I use.
Ans. On your facts the Income-tax Return Form has to be filed in ITR4.
Q.13 I and my wife we jointly own a very big flat in Noida. Both of us have contributed for this single flat. We are owners in the ratio of 50 : 50. For the year ending 31st March 2012 the total interest payable in respect of housing loan for this flat will be Rs. 3 lakhs. I will like to know whether we will get a tax deduction combined of Rs. 1,50,000 or whether each of us can separately claim tax deduction of Rs. 1,50,000 in our separate Income-tax Returns.
Ans. On your facts please note a happy news for you and that is both of you will be entitled to tax deduction of Rs. 1,50,000 being interest on housing loan individually. Thus, you can claim deduction in your Income-tax Return of Rs. 1,50,000 being the housing loan interest. Similarly your wife can separately claim tax deduction of Rs. 1,50,000 on the interest payment for the property.
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The Author is Tax and Investment Consultant at New Delhi for last 40 years. He is also Director of M/s. R.N. Lakhotia & Associates LLP & The Strategy Group.
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