Ask Mint | Closing loan won’t revoke tax break

Ask Mint | Closing loan won’t revoke tax break

—Sanjeev Das

Even if you foreclose the loan before five years, the tax benefits you have already claimed cannot be revoked. The payback of tax benefits clause applies selectively to the tax benefit on the principal paid and that too only if the house is sold off before the five-year period is over and not because the loan is repaid before five years.

I have taken a home loan for a self-occupied property. Since the property is still under construction I stay in a rented apartment. Can I avail a tax rebate on my house rent allowance (HRA) as well as my housing loan (interest and principal)?

—Sandeep Aggarwal

Contrary to popular opinion, there is no restriction under the Income-tax Act with respect to claiming tax benefit on house rent and housing loan together. The HRA exemption is covered under section 10(13A). In fact, section 23(4) clearly recognizes the fact that more than one house property can be occupied and used by the assesee at the same time for the purposes of his own residence. However, you can claim tax deduction only from the fiscal year in which the construction is completed.

I am working in Singapore and have a domestic fixed deposit of Rs10 lakh in India. Do I need to pay tax on the interest income? If yes, do I need to file my income-tax returns for the same?

—Rajesh Kumar

In your case, assuming you do not have any other income in India and are getting an interest rate of 8% on the fixed deposit, your annual income comes to Rs80,000, which is below the tax-free limit for income-tax purposes. Therefore, you are neither required to pay any tax, nor do you need to file your income-tax returns in India.

However, if your bank has deducted TDS on this amount, which will come to around Rs8,000, you can claim refund of this amount by filing income-tax returns in India.

If you are an NRI, please inform your bank to re-designate the deposit as a non-resident (ordinary) account.

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