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Even self employed person can claim deduction towards rent of house property


Chartered Accountant

Even self employed person can claim deduction towards rent of house property
Query 1]
I am a Central Government Pensioner, 82 years old, drawing pension of over Rs. 70,000/- p.m. I have two granddaughters, aged 11 years and 6 years. I intend to gift money to my son, daughter-in-law and granddaughters my savings amounting to Rs. 3,00,000/- p.a. I request your opinion as to,
  1. How much money can be gifted every year?
  2. Frequency of giving gift to one person or to others mentioned above?
  3. Since grand daughters are minor, they have no PAN cards. Is there any issue in making the gift?
  4.  Whether the amount gifted is exempt from income tax? [Harjit]

“Something magical happens when parents turns into grandparents. Their attitude changes from “Money doesn’t grow on trees” to spending it “Like it does” - Paul Linden
There are no restrictions on the amount of gift to granddaughters. Any amount can be gifted at any number of times. Amount gifted would be totally tax free and do not carry any sort of tax implications, neither in the hands of donor nor in the hands of recipient. Non holding of PAN by the recipient would not make any difference in its tax treatment.
Query 2]
I have read about section 80GG in which it is clearly said that if a person is not having his own house in a city in which he is doing job or business. Whether claim deduction of Rs. 5000 pm is available?  My query regarding this section is that if a person doing job or business and living in a house which is in name of his father and if he shows in his IT return deduction of Rs. 5,000/- pm, then how would the income tax dept. would come to know about this ?Please advice.[]
Taxpayers who don’t own a house and are staying in a rented premise are eligible for deduction u/s 80GG of the Income Tax Act towards rent Payment. Not aware of the deduction conferred by section 80GG, many individual (whether salaried or businessmen) end up paying higher tax than otherwise they would have been liable to pay.
The conditions for claiming deduction under section 80GG are as under:-
a] Individual has to prepare a declaration in Form No.10BA. 
b] Individual or his minor child, spouse or HUF of which he is a member, should not be owner of a house at the place where he ordinarily resides or performs his duties; or he should not be owner of any house at any other place, the income there from is to be determined under section 23(2) (a) or, as the case may be, under section 23(4) (a) (i.e., income from self-occupied house property).
Amount of deduction – The deduction admissible shall be the lower of the following:  
(i) house rent incurred in excess of 10% of “Total Income”; or 
(ii) Amount at 25% of “total income”; or 
(iii) Rs. 5,000 per month. [Rs. 2,000/- till FY 2015-16]
[Note: The term “Total income” means total income after allowing all deductions expect the one provided under this section itself. In case of salaried assessee who is in receipt of HRA from the employer, no deduction u/s 80GG is admissible. However, they can claim deduction towards House Rent Allowance (HRA) u/s 10(13A) of the Income Tax Act-1961]
There is no bar in paying the rent to the father and claiming deduction u/s 80GG towards it. Gone are the days when the chances of getting caught by claiming deduction were minimal. With the increased usage of e-technology, there are multiple data linking which makes most of the things handy for the income tax department. Taxpayer should not indulge in malpractices as any willful attempt to evade tax is liable to prosecution which varies from three months and three years & also with a fine under section 276C. Central Board of Direct Taxes (CBDT) has recently directed the tax department to exercise this power in cases of tax evasion.
In your specific case, if all other conditions are satisfied, you can claim deduction u/s 80GG by paying the house rent to your father.
Query 3]
I am having a joint savings account with my husband. While opening the bank account, mistakenly the banker has made my husband as primary account holder and me as a secondary account holder. So, at the time of preparing income tax return, can I show this account in my income tax or only the primary account holder can? Last option, close this savings account and open a new one with me as a primary Account holder?  Also, whether interest on SB account is taxable or tax free? Please suggest. [Amita S-]
  1. In case of joint saving bank accounts, interest would be taxable in the hands of the beneficial account holder. Taxability of interest depends upon the beneficial holding of the fund in that account and is not dependent on the primary or secondary name in the account. As a tax management measures in such cases & in view of increasing compliance burden of reporting all accounts in the ITR forms, taxpayers may now consider opting for individual account instead of joint accounts.
  2. Section 80TTA provides for deduction of interest on deposits in saving account up to a maximum of Rs. 10,000/- only. Interest received over & above Rs. 10,000/- is taxable.  For example, if your interest on SB A/c is Rs. 11,000/- then at the first instance Rs. 11,000/- would be added to your income under the head “Income from other sources” and thereafter Rs. 10,000/- deduction is required to be claimed in section 80TTA under chapter VI-A.
  3. In your specific case, you can incorporate the present bank account details while filing your income tax return.
Query 4]
I have following queries, please advice in the case. My friend purchased a house by availing bank loan in 2000 (approx). By 2010, he closed the housing loan by repaying regular monthly installments from his salary. In 2011, he purchased another house by availing housing loan. Now, he wants to sell the first house and adjust the sale proceeds to the housing loan of second house. Both the houses are in his name only. Kindly guide:
  1. Whether he can adjust the sale proceeds of first house in the housing loan availed for the second house and claim income tax benefits?
  2. Whether it can be treated as sale proceeds of first house are utilized to purchase second house by adjusting the sale proceeds to outstanding housing loan under relevant Section 54?
  3. What will be income tax implications and how to deal with them?
    [Deepak Pande-]
An Individual/HUF can save Long Term Capital Gain (LTCG) arising from sale of house property by claiming an exemption Under Section 54. For exemption u/s 54, taxpayer have to invest the amount of LTCG for purchase or construction of another residential house property within a prescribed time period. The prescribed time period is one year before or two years after the date of transfer for purchase and three year after the date of transfer for construction of house property. In your specific case, your friend has already purchased the second house property in 2011 (around 5 years prior to present sale of first house property). Resultantly, capital gain exemption u/s 54 would not available despite the fact that the amount is going to be utilized towards repayment of the amount borrowed for investment in the second house property.
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
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