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I had taken a home loan for a housing project and the bank made the initial payment to the builder. Now the project is stalled due to some legal issues. Can I get the same loan transferred to another project? Will the builder repay the money?
—Waris Ahmed
The loan for my house in Mumbai was closed on 16 September. My wife was a co-owner and co-borrower to the loan. The flat is now on rent. Meanwhile, I shifted with my family to Pune and stayed in a rented flat till November against which I have claimed deductions. On 26 November, I purchased the same Pune flat along with my father, who is a co-applicant to the loan. He has a separate house of his own, too. Can I show repayment of both loans, including interest and principal in 2009-10, for tax purposes since I have paid instalments towards both loans? Also, since my father is a 50% owner in the Pune house, can I pay rent to him and seek deduction?
—D. Sandeep
One thing you need to note is that since your wife was a co-applicant to the first loan and your father is a co-applicant to the second loan, you can claim tax benefits only to the extent of the amount paid/contributed by you in both the loans. As per the Income-tax Act, 1961, you can claim a maximum deduction of Rs1 lakh per annum under section 80C on the principal repaid on all loans put together.
For the interest part, since the first property was rented out, you can claim the entire amount of interest paid for tax purposes after considering rental income and taking the benefit of standard deductions and provisional expenses on repairs. On the second property, which is self-occupied, you can claim a maximum of Rs1.5 lakh under section 24. As stated earlier, the extent to which you can claim tax benefit will depend on your contribution.
Coming to your second question, you may not be able to show rent receipts to claim tax benefits since it is a self-occupied property. We suggest you consult a tax expert on this query.
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