What are the tax implications if a person buys a house with a loan and sells it within three years? What will happen if he sells after three years? Also, what is the effect on benefits related to interest and capital repayment?
Harsh Roongta, CEO, Apnapaisa.com
— Suhasini Roy
If you purchase a house by taking a loan and you sell it within three years and you make a profit, you will be liable to pay short-term capital gains tax since the sale took place within three years. But if the sale takes place after three years, then a long-term capital gains tax liability would arise. Long-term capital gains will be exempt from tax if the profit amount (after factoring in indexation benefits) is invested in specific bonds or in a house property as specified under section 54. Capital repayment is allowed as deduction under section 80C up to Rs1 lakh and the interest payment for a self-occupied property is allowed as deduction under section 24(b) up to Rs1.5 lakh. There is no limit on the deduction of interest payable on a loan taken to acquire a property that is given out on rent.
Are there any tax benefits on repayment of education loan?
You can get tax deduction on the interest paid for a loan taken for higher education for yourself, your spouse or your children.
Will my mother’s firm get tax deduction if I buy a car in her name and take a loan in my name?
— Sunil Rawat
Assuming your mother is self-employed, she can claim deduction for the interest payable on the loan taken to acquire the car, provided it is used exclusively for the purpose of her business. She can also claim deduction on the depreciation of the car. However, the liability to pay the loan will have to be hers.
If I take a home loan from a relative, will I get deduction only on the interest part? What documents will I need to take a loan from a relative?
You can take a home loan from your relative and claim tax deduction benefits under section 24 (interest paid on the loan up to Rs1.5 lakh). No deduction is available for partial payment under section 80C. If required during the assessment year, you will need to provide proof that the loan was given by the relative and used for the purpose of acquiring the house property.
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