Is ltcg applicable &deduction of housing loan permissible

Tax planning 307 views 3 replies

S S Dahale

Agri and business

442 Points Posted on 29 August 2016

Mrs.XYZ ( a entrprenuer)buys a Flat in year 2014, by taking a housing loan, and claiming its deduction in ITR for last 2 years , both as part payment of principle amount , and interest paid to bank , Now in the 3 rd year. for some reasons, she wants to sell that newly acquired flat , before mandatory 3 years ( application of LTCG) , so what BEST avenue as INCOME TAX PLANNING is for her ?

such that she can retain deductions ( of last 2 years)for REPAYMENT of BORROWED CAPITAL of HOUSING LOAN and INTEREST PAYMENT. as part of proceeds of that SALES of FLAT, would be used by her to PRECLOSURE of housing loan, now 2 nd question /querry arises how to treat entire amount / balnace amount , (a) will it be a LTCG if sold after 36 months or (b)STCG if sold before 3 years , or (c)will be a BUSINESS INCOME .

(i) Postpone registeration of sale deed , after 3 years - as if she does the same before 3 years , she may not (necessarily forego) claim for deduction of repayment of principle and interest of housing loan. as there is No provison for revisng ITR for last 2 years .

Replies (3)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

211643 Points Posted on 29 August 2016

1. It cannot be treated as Business income. For the lady its an investment.

2. Note that as per sec. 80C(5): Tax Deduction u/s. 80C claimed would be reversed if Property sold within 5 years from the end of financial year in which such property is acquired by her. The aggregate amount of tax deduction already claimed in respect of previous years shall be deemed to be the Income of the Assessee of such year in which the property has been sold and the Assessee shall be liable to pay tax on such income.

3. Some banks still levy PRECLOSURE charges on certain types of home loans, specifically before completion of tanure 5 years.

4. "(a) will it be a LTCG if sold after 36 months or (b)STCG if sold before 3 years" :: Correct

S S Dahale

Agri and business

442 Points Posted on 29 August 2016

Thanks, as per the reply above "Note that as per sec. 80C(5): Tax Deduction u/s. 80C claimed would be reversed if Property sold within 5 years from the end of financial year in which such property is acquired by her."

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Inference that can be drawn , this reversal of deduction of HOUSING LOAN repayment and INTEREST ON BORROWED CAPITAL u/s 24, can be withdrawn by AO / ITO , or CPC , ONCE THAT FLAW ( mis utilzation of provision of deduction) done by assesse comes to ITS KNOWLEDGE,( to disqualify its deduction in ITR) there is NO PROVISION in IT on PART of ASSESSE to MAKE its DISCLOSURE SUOMOTTU, as she has filed ITR for thsoe last 3 years ,

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

211643 Points Posted on 29 August 2016

Please read carefully:

"The aggregate amount of tax deduction already claimed in respect of previous years shall be deemed to be the Income of the Assessee of such year in which the property has been sold and the Assessee shall be liable to pay tax on such income."

It means the exemption taken in previous years is added back to income of the year in which it is sold.

No changes in old returns.