My landlord wants me to pay for any maintenance work carried out in the house I live in. Am I legally bound to do so? If I am and I actually pay for the work done, can I claim tax relief? What documents do I need to avail tax concession?
— Mukul Varshney
A tenant is not obliged to pay for the maintenance and repair work of the house he is living in unless this fact is stated in the lease deed and agreed upon by both the landlord and the tenant. Usually, the houseowners specify in lease deeds that the
tenant shall not undertake any kind of maintenance, renovation and repair work in the house without the permission of the landlord. The Income-Tax Act does not give any concession to the tenants for undertaking the repair and maintenance of the property taken on rent. In fact, houseowners are given a standard deduction of 30% from the rent received by them in a fiscal year irrespective of the repair work undertaken by them.
I bought a house in July 2004 for Rs3.42 lakh and sold it in October 2008 for Rs6.50 lakh. My annual income is Rs5 lakh. Will I have to include the gains from the house sale in my income? What will my capitals gains tax be?
— Alex Rosario
Yes, you will have to include the net profit made on the sale of your house as income under the head of capital gains. As you have held the house for more than three years, the gain is a long-term one and the cost shall be indexed as per the cost inflation indices (CII) for the years of sale and purchase.
Indexed cost price = cost price x (CII of sale year ÷ CII of purchase year)
3,42,000 x (582 ÷ 480) = 4,14,675
Long-term gain = 6,50,000 - 4,14,675 = 2,35,325.
So, the long-term capital gain taxable in your hands is Rs2,35,325, which will be taxed at a flat rate of 20% (that is Rs47,065). You can avoid this by using the amount of gain to buy a new house within two years or buying a property within one year before the date of transfer of such property. The exemption is also available if you construct a new residential property within three years from the date of transfer, wherein the entire capital gains shall be exempt from income tax under section 54 of the I-T Act.
However, as per the I-T Act, the property on which capital gains tax exemption under section 54 is claimed cannot be sold before three years of its purchase, else the entire capital gains exempted earlier becomes taxable in the year of sale.
I bought a house in 2003 in my hometown for my parents with a loan of Rs5 lakh. I sold it recently and plan to invest the money received for constructing a new house in the same town. I have bought another house, which is still under construction, for myself with a loan of Rs18 lakh in the National Capital Region. I have closed my earlier loan. Can I avail tax benefit for my current loan?
— Santhosh Nair
You can avail tax benefit for your current loan. However, as the house is still under construction, you can claim deduction for the interest on the home loan only after the construction is completed. The total interest for the pre-construction period will be divided into five equal parts and claimed in the next five years. For the fiscal years after the completion of the construction, if you plan to reside in the same house, the maximum amount of interest eligible for deduction is restricted to Rs1.5 lakh. However, the entire interest paid on the home loan can be claimed as a deduction if the house is given on rent. The principal amount repaid for a housing loan is eligible for deduction under section 80C up to a maximum amount of Rs1 lakh.
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