Rental income
Q. My wife and I are senior citizens drawing pension. We have a flat in our joint names which has been let out.
Hitherto the monthly rent was being credited to our joint account. But the entire rental amount was shown as income in my hands and tax paid accordingly.
From this (2022-23) FY we are thinking of crediting the rent to the account in the individual name of my wife which will be shown as her income for income tax purposes.
We would like to have your comments on the proposal, specially on the tax implications, if any.
T.Viswanathan
A. The house property is jointly held in both your and your wife’s names due to which the rental income arising out of the house property will be treated as income in your hands and your wife’s hands irrespective of who receives the funds based on the proportion of ownership.
You may collect the monies to either of your accounts or your joint account based on your convenience and ease of operation of your funds.
After filing of the return, there may be a possibility of receiving a request from I-T department to clarify for the drop in the rental income. Once you clarify your stand, it will be closed. Chances are high of receiving this if the monthly rents are substantial.
Income tax rebate
Q. I have referred the ‘Moneywise’ section of your newspaper and have the following query regarding income tax rebate, a reply to which would be graciously received.
I am a salaried person and have invested in a mix of ELSS and NPS (employee contribution deducted beforehand) for claiming rebate in income tax under section 80C.
Total investment is about ₹1.65 lakh. After a tax rebate of ₹1.5 lakh under section 80C, can I claim an additional tax rebate of ₹15,000 under section 80CCD (1B) if my contribution in NPS is about ₹90,000?
Can one claim a tax rebate of any value ranging from zero to ₹50,000 under 80CCD (1B) or it has to be ₹50,000 only assuming the contribution in NPS is likewise?
Arushi Jain
A. Contribution to NPS directly by your employer as employee share and employer share is covered under Section 80CCD(1) and Section 80CCD(2) of the Income Tax Act, 1961, respectively.
The deductions on account of these contributions are covered under Section 80CCE of the Income Tax Act, 1961 whereby a limit of ₹1.5 lakh is imposed for the deductions under Section 80C, Section 80CCC, Section 80CCD(1) and Section 80CCD(2) of the Act.
You are not eligible to claim the shortfall of the deductions of Section 80CCD(1) and Section 80CCD(2) under Section 80CCD(1B). You shall be eligible to claim deduction under Section 80CCD(1B) only when you make an additional contribution voluntarily up to an amount of ₹50,000.
One can claim a tax deduction of any value up to ₹50,000 based on the actual voluntary contribution made by them in a particular assessment year.
Home loan
Q. I am 24 years old. I have a question related to home loan and tax benefit.
My father had recently taken a home loan off ₹15 lakh from a cooperative bank at 10.5% interest rate for 10 years.
My father is a State government employee.
Recently, I had seen my father’s payslip which mentioned a net amount of about ₹45,000.
I had noticed a tax deduction of ₹8,000 from his salary every month.
For the bank loan, every month he pays ₹22,000. Is there any way to reduce the tax deduction from his salary?
I want to highlight his home loan to reduce tax liability. Can you please give me suggestions ?
Jeevan P.
A. With respect to the principal component in the EMI, the amount of principal repaid in the assessment year can be claimed as deduction under Section 80C of the Income Tax Act, 1961, as amounts repaid towards the capital borrowed for the purpose of purchase or construction of a residential property whose income is chargeable under “Income from House Property” can be claimed as deduction.
With respect to interest component in the EMI, the interest paid on housing loan can be claimed under Section 24 of the Income Tax Act, 1961.
It is to be noted that the maximum deduction under this provision cannot exceed ₹2 lakh per year (including the interest paid for that assessment year).
Your father is required to declare to his employer regarding the home loan repayment by producing a certificate issued by the lender which will have the break-up of the interest paid and the principal repaid based on which the deductions will be taken into consideration while computing the tax on his salary and the respective TDS on the salary.
(The adviser is Partner, GSS Associates, Chartered Accountants, Chennai)
