Interest earned from PPF and Sukanya Samriddhi Account are exempt from tax
Interest from PPF and Sukanya Samriddhi Account has to reported under ‘others’ in Schedule EI of the tax return or in exempt income line item
I invested into a Public Provident Fund (PPF) and a Sukanya Samriddhi Account (SSA) for a minor, and earned exempt interest of ₹1,500. Also, I earned ₹1,500 interest from taxable FDs in the minor’s name. How will this be shown in tax returns?
Income of a minor child is clubbed with the income of his/her parent whose income is higher. Interest earned from PPF and SSA are exempt from income tax in India. Such interest will need to be reported under “others”, (including exempt income of minor child) in Schedule EI (on the basis that such parent has to complete ITR-2 or ITR-3) of the tax return or in exempt income line item (if the parent is required to complete ITR-1 or ITR-4).
For interest from FD, an exemption under Section 10(32) of the Income-tax Act, 1961 of up to ₹1,500 per minor child can be claimed from such income that is clubbed.
How much tax benefit will I get on interest paid for two home loans (one is a self-occupied house and the other is let out)? Currently, I’m paying ₹2 lakh interest on the self-occupied house and bear a loss of ₹1.5 lakh from the let-out property. Will I get tax benefit on ₹3.5 lakh or ₹2 lakh?
—Name withheld on request
The interest paid on a home loan taken to acquire a house can be claimed as deduction under Section 24 of the Income tax Act. The entire actual interest paid/payable in respect of the let-out property can be claimed as deduction against rental income, whereas deduction in respect of the interest for self-occupied property is capped at ₹2,00,000 per financial year.
Further, as your total loss from the head income from house property is ₹3.5 lakh, you will be eligible to offset only ₹2 lakh against your other income for the said FY. The balance loss of ₹1.5 lakh can be carried forward for future set-off against income from house property up to eight years.
My mother had bought a plot of 3,600 sq.ft in Pune in 1968 for ₹20,000. A developer constructed six flats on this and gave me a 2-BHK flat of 700 sq.ft, a terrace of 1,200 sq. ft, a stilt garage and an outhouse of 200 sq.ft as garage. On 24 April 2015, a new developer constructed new apartments under redevelopment. I got a 770 sq.ft 3-bedroom flat, two stilt garages and terrace of 1,320 sq.ft in lieu of the earlier flat, on 15 October 2017. If I sell it, will the gains be long term?
—Name withheld on request
The date the redevelopment project (in respect of agreement as on 24 April 2015) received a project completion certificate will be considered the date you acquired the redeveloped flat. Also, the stamp duty value of the redeveloped flat as well as any cash received from the developer ought to be treated as the cost of acquisition of the redeveloped flat. It appears that the date of acquisition for the properties that you are selling could be a date very close to or prior to 15 October 2017.
A house property (the flat with two garages and terrace) that is sold within 24 months from the date acquired would be considered as a short-term capital asset. Hence, if you sell the current properties before holding it for 24 months, the gains will be considered as short term.
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Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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