Tax planning : house property taxation

Tax queries 564 views 3 replies

amit

sddsfd

116 Points Joined July 2008

Dear All

I have very huge Interest payment of House Property with my co-owner (Spouse). Where each co-owner bear’s interest in the range of 10Lacs per annum but the said House Property is self-Occupied thus its interest deduction is only up to Rs.1.5Lacs. If I let-out my portion[50%] to my co-owner[Spouse] with fair rent amount which goes to 6 Lacs per annum then it saves taxes more than SOP. Is there any risk of colorful scheme to evade taxes. Please advice whether to go for the above planning or not. Is there any case laws or Judgments in relation to above then please specify.

Replies (3)

Devendra

Chartered Accountant

4780 Points Joined March 2009

As per my view, such rent agreement between you and your spouse seems vague.

Note : The appropriate word is 'tax planning' and not 'tax evading'.

amit

sddsfd

116 Points Joined July 2008

but my all agreements i.e. purchase agreements, loan agreements all shows clear cut line of demarcation between me & my spouse that each one owns 50% portion. & further loan repayments also made accordingly 50% by me & 50% by spouse.

In this no vagueness but still is there any chance that my tax planning will get in trap of tax evasion scheme any way or is anybody do such kind of plans or any case laws is there on such case.

Mihir

Wealth Manager

5293 Points Joined December 2008

If you are saying that the interest portion on your home loan comes to 10 lacs each, or 20 lacs combined in a financial year, you must have taken a very large home loan. A bank can give such a loan only on the basis of the borrowers repayment capacity - in 30% tax bracket. Secondly, it is clear that the house that you have purchased must be pretty big. You can live in a rented house, and give your purchased home on rent. The rent you receive can easily pay for the rent that you are going to pay. The interest deduction u/s 24(b) allowed shall be interest actually paid.

Please recheck whether this amount you are saying of 20 lacs, is interest portion or EMI for the year.