My wife and I have taken a joint home loan for an under-construction property. The bank will release the amount in tranches as and when the construction crosses certain stages. The equated monthly instalments (EMIs) will be recalculated at every stage and the full-fledged EMI will be charged once we get possession. Will both of us get deduction on the EMIs that we pay from the beginning or the EMIs that will start after possession?
Sachin Vasudeva, senior partner, SC Vasudeva and Co. Chartered Accountants
You have not clarified whether the property that is being constructed is in your name or in joint name with your wife. I presume that the property that is under construction is held jointly by you and your wife in the same proportion in which you have applied for the loan and that the initial amount given for the purchase of the property has been given by both of you from your own sources of income. The answer to your query is based on these presumptions. Both of you will be entitled to deduction in respect of the interest paid on the loan up to Rs1.5 lakh each. The deduction will start in the year in which you get the possession of the property. The interest paid for the pre-construction period shall also be allowed as deduction in five equal instalments commencing from the year in which you get the possession. Further, repayment of the principal amount will entitle both of you to claim deduction under section 80C.
I sold my residential property in February this year. I had been living in it for 10 years. Will I have to pay long-term capital gains tax? Can I set it off against the losses I made in the stock market last year?
The gain you made by selling your 10-year-old residential property is taxable as a long-term capital gain. The gain will be computed by reducing the aggregate of indexed cost of the acquisition and expenses incurred for making such a sale from the sale consideration. The tax chargeable on net gain is 20% plus education cess. I presume that the losses that you have incurred are in respect of transactions undertaken on a recognized stock exchange, where securities transaction tax (STT) has been paid. As per the provisions of the Act, loss arising in respect of shares where STT has been paid is not allowed to be set off against any other income. Accordingly, you cannot set off the loss incurred in share transactions against your capital gain earned on the sale of the residential house. I may add that you can save the capital gains tax by investing the capital gain in purchasing or constructing another residential property or investing the capital gains in specified bonds to save capital gains tax.
Can I avail tax benefit on the tuition fee of two children?
You are entitled to avail tax benefit on the tuition fee of both your children under section 80C up to Rs1 lakh.
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