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Home loan repayment by nri

J Ravesanker (Partner) (32 Points)

18 February 2013

Can anyone clarify the below tax treatment query:

An NRI has repaid the EMI from his income for a jointly owned residential property with his spouse.

01. For the purpose of tax planning, he provides a "No Objection certificate" by which his wife intends to claim the tax benefit u/s 80C and 24. Is that tenable?

02. Is there any ceiling on the payment of insurance premium on a policy taken in the name of ones spouse?

Look forward to hear your clarification

Regards

Ravi

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10 Replies

Nikhil Kaushik (Fellow CA) (84891 Points)
Replied 19 February 2013

1. I dont think the benefit under 80C and 24 become transferable on the basis of NOC.

2. there is no limit on payment of insurance for spouse (though the overall limit of 80C shall apply)

Tushar Ajmera (Article (CA)) (24 Points)
Replied 19 February 2013

Originally posted by : nikhil

I Think she can claim deduction u/s 80C & 24. Further u can refer to the below mentioned link in this regard.

https://www.simpletaxindia.net/2013/02/benefit-of-joint-home-loan-under-income.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+SimpletaxIndia+%28SIMPLE+TAX+INDIA%29

Nikhil Kaushik (Fellow CA) (84891 Points)
Replied 19 February 2013

Dear Tushar,

let me quote from the very article you have referred here:

1 - "The share in tax exemption that each of the co borrower gets is in proportion to the share in the home loan availed by the co borrower"

Thus, generally, the sharing of the benefits is done in the ratio of ownership rights

2. "In cases where one of the co owner is not earning then the earning partner has to enter into a legal agreement with the former to state that the entire burden of the home loan is being borne by the earning member. This will make the earning member to take full advantage of all tax exemptions available on the home loan. This agreement can be signed on Rs. 100 stamp paper.

Each of the borrower has to obtain the statement of payment made to the financier individually and submit the same separately in order to avail the tax exemptions."

Based on the above, an agreement may be signed to transfer repayment liability as well the benefits available under 80C and 24, in case one of the co-owner is not earning.

In this case, the NRI has made the repayment and his wife intends to claim the benefits under 80C and 24. It can thus be easily deduced that both, the husband and wife are earning. Thus the option as suggested by you, won't work out here.

Tushar Ajmera (Article (CA)) (24 Points)
Replied 19 February 2013

Dear Nikhil

Cant it be done like the wife shows the reimbursement of the loan & interest paid by the husband & avails the excemption??

Nikhil Kaushik (Fellow CA) (84891 Points)
Replied 19 February 2013

See Tushar,

the issue is not whether it can be shown as reimbursement or not. For income tax purposes, there are two separate assessees claiming separate deductions on a jointly owned property.

What you are trying here is to shift the situs of the deduction from husband to wife where none is warranted.

My understanding of the provisions of "income under house property" and chapter VI, is that wherever deduction for payments on behalf of relatives is allowed, it has been expressly mentioned in the Act. Beyond that there is a huge grey areq you are trying to decipher which may land you with penalties for tax evasion at worst.

Tushar Ajmera (Article (CA)) (24 Points)
Replied 19 February 2013

soo basically if the co-owners are working than dere is no provision by which any one of them can claim the entire deduction..right??

Tushar Ajmera (Article (CA)) (24 Points)
Replied 19 February 2013

aint there any case laws in this regard?

Nikhil Kaushik (Fellow CA) (84891 Points)
Replied 19 February 2013

Not to my knowledge....though it could be worthwhile to do some case law search to check precedents.

Piyush Goel (Sr. ERP Finance Consultant) (91 Points)
Replied 07 March 2013

Hello Nikhil,

Thanks for the Arcticle... i was looking at this thing only. Can you please let me know also that it is mention in provision of Income of House Property?? if yes, then provide me the link of provision.

Thanks

Piyush