Your taxes

My wife and I jointly purchased an apartment in Chennai. My wife's contribution was 70 per cent of the down payment from her savings. My contribution was the balance from my own savings. We also took a loan to fund the purchase. We live in rented premises and have let out the apartment. Should we show the interest for tax deduction as 70 per cent for my wife's income and 30 per cent to my income?

Raja

You and your wife are joint owners of the property; therefore you both can show the rental income in your returns in proportion to the contribution made while purchasing the property. Further, in case of a let out property, interest actually payable during the year can be claimed from the annual rental value of the property. The deduction will be subject to a certificate from the lender specifying the interest payable during the year on the capital borrowed. It can be claimed by you and your wife in proportion to your contribution while purchasing the property.

We took possession and moved into an apartment in September 2014. It was under construction for 18 months. My wife and I (both employed) had taken a home loan and have been paying full EMI for the past six months. Can we avail tax benefits for the full financial year 2014-15 or can we do so only for September 2014 to March 2015?

Mahesh

Deduction for interest paid on the home loan can be claimed under the head “Income from house property” once construction is complete and possession is taken. Pre-construction interest (i.e. interest prior to the financial year in which property is acquired) can be claimed in five equal instalments starting from the year in which construction has been completed. The entire interest payable for the year in which the construction has been completed can be claimed in the same financial year itself.

In your case, the interest for the full year beginning April 2014 to March 2015 can be claimed in FY2014-15 itself. The deduction of pre-EMI interest which you would have paid or payable during April 2013 to March 2014 can be claimed in five equal instalments, starting from the Financial Year 2014-15.

Please note that for self occupied properties where the house property was purchased or constructed within three years from the financial year in which capital was borrowed, a deduction for interest payable during the year up to a maximum of ₹ 2 lakh can be claimed during the year (including the pre-EMI interest). Similarly, deduction is allowed for any repayment of the amount borrowed (principal only) by the assessee for purchase or construction of a residential property, the income from which is chargeable to tax under the head, "Income from house property”, which is only when the construction is completed and possession is handed over. This deduction is available in the overall limit of ₹150,000 u/s 80C of the Income Tax Act, 1961. The principal repaid prior to April 2014 cannot be claimed in current or future financial years. Both the deductions can be claimed in the ratio co-owners contribute funds toward the purchase of the property or loan repayment.

The writer is a practising chartered accountant. Send your queries to >taxtalk@thehindu.co.in

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