Benefit of 80C for home loan prepayments

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Hemali Shanghvi (Querist)
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19 July 2011 Hi,

My client is a NRI and she has a home loan in India. She has made a prepayment to clear her principal amount. Can she claim benefit u/s 80c if the payment has not benn made from taxable income generated in India but from her income in USA?

Thanks in advance!!

REgards
Hemali

CA Sachin D Jain

CA Sachin D Jain (Expert)
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20 July 2011 Dear Hemali,

As per the requirements of sec 80C of the IT Act, 1961 read with other provisions of Chapter VIA, there is no specific requirement that the repayment of home loan should be from taxable income in India.

But one of the condition for claiming deduction is that the income from such house property should be taxable in India. Further, the deduction under Chapter VIA (incl. u/s 80C) is restricted to the amount of gross total income of the assessee under the income tax act. Consequently, if NRI is not having taxable income in India, he/she would not be able to claim such a deduction.

Hence, in my opinion, NRI would be able to claim deduction u/s 80C even though the payment has been made from income generated in USA.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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20 July 2011 The deduction u/s 80C of the I T Act of Principal Amount is subject to restriction that it can not exceed Gross Total Income and that maximum allowed is Rs 1,00,000. Exact wording of the provision contained in Section 80C simply states that the deposit should be made in the financial year for which income is taxable. In fact previous restriction that the said deposit should be made out of taxable income , has also been withdrawn. Thus , as the provision stands today, a resident or non resident whose income is taxable under the I T Act can claim deduction u/s 80 C of the I T Act for any amount limited to Rs 1,00,000 for any specified investment made during the financial year. The extract of the relevant portion of Section 80C is given as under
“80C. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh rupees. (2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee”

So per this case as Mentioned by Mr.Sachin d jain. since your client is not having taxable income in India. so she could not able to claim the above said deduction

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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20 July 2011 I agree with the experts

Hemali Shanghvi

Hemali Shanghvi (Querist)
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20 July 2011 Thanks all!
What I understand is that it is not necessary to spend the repayment amount from taxable income. But if she had taxable income from other sources to the tune of Rs. 1lac or above, she could have claimed it, right?

Thanks again!!

CA Sachin D Jain

CA Sachin D Jain (Expert)
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21 July 2011 Dear Hemali,

You are absolutely right.

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