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Tax Planning

CA. Vineet Grover (Chartered Accountant) (1538 Points)

08 November 2007

We have purchased a flat in the name of three persons on an equal sharing basis namely me, my father and my mother. We have also taken a home loan for which the entire EMI on home loan is paid by me. Will i be eligible to claim the entire interest and principal repayment on home loan in my income tax return, though i am owner to the flat for only 1/3rd share? Is there any section / case law governing the case? If the same cannot be possible is there any ways or means whereby i may be able to claim the entire benefit of interest and principal repayement on home loan in my income tax file?

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6 Replies

Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 08 November 2007

LIBERAL INTERPRETATION NECESSARY.- The object of section 80C is the encourgement of thrift, and the section should be interpreted in such a manner as not to nullify that object [Chandulal Harjiwandas v.CIT, (1967) 63 ITR 627, 631 (SC)], Income Tax Law 4th edition vol2,C&P,2444

KAAPIL (COACHING ) (11717 Points)
Replied 08 November 2007

Thanks Mr. Sampat Jain for the valuable input. Happy Diwali.

CA.Saibaburao Nanduri (Chartered Accountant) (3847 Points)
Replied 09 November 2007

Dear Vineet Grover ! You are not the owner of the property. You are only the co-owner having 1/3rd share.You can not claim ENTIRE benifit of inerest and principal. You can claim 1/3 rd of total interest and principal.

Ramakrishna (Financial Executive) (438 Points)
Replied 09 November 2007

Dear Grover, As Mr.Nanduri pointed out, you can claim HL benefits only for that portion of the interest in the property for which you are the absolute owner. The Section 80C itself clearly mentions the word owner of the property. Then how is it possible to claim more benefit than what is eligible? Though you may be repaying the entire loan amount with interest since the other two partners happens to be your parents, you would be entitled to claim the benefits for the portion of the loan which has been borrowed by you. If you are so keen in including your parents in the property without losing your HL benefits for income tax, the best option could be to obtain the property in your soul name by utilising the loan amount and later on you can by way of gift, handed over their shares in the property. Since gift of property would not by itself involve any fresh tax burden, this would have been a better option in these type of cases. Am i rightt?

CA. Vineet Grover (Chartered Accountant) (1538 Points)
Replied 10 November 2007

Thnx Mr.Nanduri & Mr.Ramkrishna for your valuable inputs to the aforesaid issue. I had a similar thought which you happen to provide but wanted a second opinion. I would do it accordingly. Being Chartered Accountants we too get stuck at issues wherein we may have to go for fomal discussion to make a stronger bacground of the case as we here to promote tax planning and not tax evadiung. We should always keep one thing mind that we should always suggest for tax planning and not tax evading which you have rightly done and have done full justice to your proferssional We all should maintain the same and never let down our institution / profession and should prove the nation that we are responsible citizens of India and are here for its betterment.

vishal (ca) (70 Points)
Replied 17 November 2007

Hi Mr Grover I have another question that suppose all the 3 person have applied for the loan & the loan is jointly sanctioned to them but all the installment were paid by one person & the amount for purchase of the property is also paid by one person but the registration is done in joint name in that cae what would be the situation in my opinion since law governing to ownership of porperty allows to register in any other person's name hence though it may be in the joint name but owner could be only one person & hence 80C may be claimed by such one person