Frequently Asked Questions On Income Tax
Benefits On Purchase Of A Residential House
1. What are the tax
benefits that are available if one avails of housing loan ?
- Deduction of interest on housing loan
In the case of self-occupied property acquired or
constructed out of borrowed funds the deduction available for
interest on capital borrowed is Rs. 1,00,000/- for the
assessment year 2001-2002 and for the assessment year 2002 -
2003 and subsequent years the limit has been increased to Rs.
1,50,000/-. In case of property, which is rented, the whole of
the interest amount is allowed as deduction. The interest on
borrowed funds in pre construction period is allowed over a
5-year period.
Limit of repayment of housing
loan The limit of repayment of housing loan qualifying
for rebate is Rs. 20,000/- from the assessment year 2001-2002
and subsequent years.
Is there any relief from tax arising on transfer of
long-term capital assets under the Income Tax Act,
1961?
- Capital Gains on sale of property used
for residence Section 54 of the Income Tax Act
provides relief to an individual or Hindu Undivided Family
from capital gains arising from transfer of a residential
house held by the assessee for a period of 36 months. Such
capital gains to the extent utilised for purchase (within 1
year before or 2 years after the date of sale) or construction
(within 3 years of date of sale) of a residential house is
exempt u/s 54. If the amount of capital gains is proposed to
be utilised, but is not so utilised upto the due date for
filing of return then, the amount of unutilised capital gain
is required to be deposited in the "Capital Gains Account
Scheme, 1988".
Capital Gains on transfer of capital
assets other than a residential house Section 54F of
the Income Tax Act exempts long term capital gains arising
from transfer of any long term capital asset other than a
residential house. Such capital gains to the extent utilised
for purchase (within 1 year before or 2 years after the date
of sale) or construction (within 3 years of date of sale) of a
residential house is exempt u/s 54F. To be entitled to this
exemption the assessee should not own more than one
residential house other than the house sold as on the date of
transfer. The provisions of depositing the unutilised
capital gain in the "Capital Gains Account Scheme, 1988" as
explained above is also applicable.
Capital Gains
not to be charged on investment in specified assets
Section 54EC of the Income Tax Act provides relief
from capital gains arising from transfer of a long term
capital asset (i.e. an asset held by the assessee for a period
of 12 months in case of shares/units and 36 months in other
cases). For claiming this exemption, the capital gains has to
be invested (within 6 months of date of transfer) in notified
bonds issued by:
National Bank for Agriculture and Rural Development
(NABARD)
National Highways Authority of India
Rural Electrification Corporation Ltd
National Housing Bank
Small Industries Development Bank of India (SIDBI)
