The interest I pay on my home loan is about Rs2.5 lakh. The flat is not self-occupied nor is it rented out. Can I get tax exemption for Rs 2.5 lakh or will it be limited to Rs 1.5 lakh?
The limit of deduction towards interest payment can be determined based on full facts. Assuming that you do not own more than one flat, the said flat shall be considered self-occupied property.
Accordingly, you shall be eligible to claim a deduction towards interest payment of Rs 1.5 lakh per fiscal (assuming the flat was acquired on or after 1 April 1999).
However, if you own more than one flat and the other flat is self-occupied, then the other flat shall be considered as deemed to be let out property. In such a case, you could claim the entire interest payment as deduction against the deemed rental income, which needs to be offered to tax. Also, you could claim deduction towards property tax as well as standard deduction of 30% of the deemed rental income.
I purchased a property in 2004 for Rs 4 lakh and sold the same on 8 March 2012 for Rs 7.25 lakh. I was informed that if I keep the amount with a nationalized bank under their Capital Gains Account Scheme (CGAS) for five years, I would be able to utilize the money after the period without paying tax. How does it work?
There is no direct tax exemption with respect to long-term capital gains (LTCG) from sale of property for the amount deposited into CGAS of a specified nationalized bank or institution. To avail an exemption from LTCG tax, you should either purchase a new house within a period of one year prior to or two years after transfer of the original property. Alternatively, you could construct a new property within three years of the sale date. In case you are unable to utilize the amount equivalent to LTCG before the due date of filing the tax return (31 July 2012 in case of salaried individuals) for the FY12, then you can deposit an amount equivalent to LTCG into CGAS to claim exemption from LTCG.
By depositing the amount in CGAS, you can claim an exemption from LTCG tax in FY12 for the old property. However, to ensure that the said exemption is not revoked in the future, you should utilize the amount deposited into CGAS for purchase or construction of new property within the time specified above. If you are unable to utilize the amount deposited into CGAS for purchase or construction of new property within the specified time frames, then the unutilized amount shall be taxable as LTCG from the end of three years from the sale date of old property; in your case, in FY15.
In case you do not propose to invest in a new property, you could also avail an exemption from tax in respect of LTCG under section 54EC of the Income-tax Act by investing in specified bonds, subject to conditions.
Parizad Sirwalla, Partner (tax), KPMG.
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