Sunday, Dec 10, 2023

You Must Be A Joint Owner, Co-Borrower, And Pay EMIs To Avail Of Tax Benefits For Joint Home Loan

Outlook Money

You Must Be A Joint Owner, Co-Borrower, And Pay EMIs To Avail Of Tax Benefits For Joint Home Loan

You should be a joint owner of the property, should be a co-borrower, and should service the loan to avail of tax benefits for a joint home loan.

I wish to register a property in the joint names of my parents. I plan to take a home loan jointly with my younger brother and parents as co-applicants. We, both brothers, only will be paying the EMI. How much tax benefit for a home loan can be availed by all of us?

You must satisfy three conditions to avail of the tax benefits for a joint home loan. Firstly, you should be a joint owner of the property. Secondly, you should be a co-borrower to the joint home loan, and lastly, you should be servicing the home loan. Since the property is planned to be bought in the name of your parents only, who will not service the home loan, they obviously cannot claim any tax benefit for the home loan. However, since you, both brothers, are planning to service the home loan but are not the joint owner of the property, you, too, can claim the tax benefits regarding the joint home loan.

I have taken up employment in the US, so I have become an NRI. However, I opened a PPF account when I was a resident of India. Can I continue contributing to my PPF account and avail myself of the tax benefits under section 80 C since I have become an NRI?

As per the Government Savings Promotion General Rules, 2018, read with Public Provident Fund Scheme, 2019, a Non-Resident Indian cannot open a PPF account under the FEMA. However, a person can continue to maintain and contribute money to the PPF account until its maturity if the account was opened when he was a resident. Therefore, since you opened the PPF account when you were resident in India, you can continue to maintain it until its maturity and claim the tax benefits under Section 80 C. However, please note that you cannot extend the account beyond maturity. Moreover, the contributions made are on a non-repatriation basis means you cannot send the maturity proceeds of this account outside India freely.

One of my clients has 7.50 lakh Long Term Capital Gains (LTCG) on listed shares on which STT has been paid. Since one lakh is exempted, and there is no tax on the balance of 7 lakh if he opts for a new tax regime. He doesn't have any income under the rest four heads, except capital gain income during the current FY. Is my understanding correct?

To determine the threshold of Rs 7 lakh of income, the full LTCG on listed equity shares and equity-oriented schemes taxable under Section 112 has to be considered. The initial one lakh of such LTCG is not exempt but will be taxed at the zero tax rate. So your client will not be able to avail of the benefit of a higher threshold for a rebate of Rs. 25,000/- under Section 87A.

Even if the LTCG on listed shares of your client did not exceed seven lakh rupees, he still would have to pay full tax on the LTCG on listed shares as rebate under Section 87A is not available against tax liability in respect of LTCG on listed shares and equity-oriented schemes. Therefore, your client will have to pay Rs. 35,000/- on the LTCG computed as under:

Long-term capital gains Rs. 7.50 lakhs
Initial 1 lakh taxed at zero % 
Net taxable long-term capital gains Rs. 6,50,000/-
Basic Exemption under new tax regime Rs. 3,00,000/-
Balance Long-term capital gains Rs. 3,50,000/-
Tax @ 10% Rs. 35,000/-  
I have presumed that your client is a resident under the tax laws. However, if he happens to be a non-resident under the tax laws, he will not benefit from the basic exemption limit and will have to pay Rs. 65,000/- tax @ 10% on Rs. 6,50 lakh net LTCG after initial one lakh, which gets taxed at zero rate and is available to all taxpayers. 

The author is a tax and investment expert.
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)