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Tag: Income Tax Benefit

  • I plan to purchase home by promoting shares. Can some earnings tax exemption be claimed?

    I’ve two residential properties in my title purchased greater than 8 years again. I’m planning to buy one other residential property within the subsequent few months. I plan to fund this buy by the long run features from the sale of shares on this monetary yr. Will the features of share sale on this monetary yr be taxable or can an exemption be claimed in opposition to buy of a residential property in subsequent monetary yr in respect of capital features on sale of the shares?

    Answer: In respect of capital features arising on sale any asset apart from a residential home, a person or an HUF can declare exemption from long run capital features if the online sale consideration in respect of such asset is invested for buying a residential home inside a interval of two years after sale of such asset. Even if a residential home is bought inside one yr previous to sale of such property the exemption continues to be out there. In case you want to self-construct a home or ebook an underneath building home, you get an prolonged interval of three years to finish building of the home or get possession in case it’s booked with a developer.

    In case the sale consideration just isn’t totally utilised for buying the residential home by the due date of submitting of the Income Tax Return, the unutilised cash must be deposited with a financial institution underneath Capital Gains Account Scheme. The cash so deposited may be utilised inside the prescribed interval for fee of home.

    One of the situation for being eligible for declare this exemption underneath Section 54F is that you shouldn’t personal multiple residential home property on the date of sale of the asset besides the one in respect of which you might be claiming the exemption. Since you already personal two homes now, you aren’t eligible to assert this exemption out there underneath Section 54F.

    Balwant Jain is a tax and funding skilled and may be reached on [email protected] and @jainbalwant on Twitter.

     

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  • Income tax: This dwelling mortgage profit can’t be availed after March 31

    Income tax: From 1st April 2022, central authorities goes to discontinue earnings tax profit below Section 80EEA to first time dwelling consumers. In Budget 2019, middle had introduced a further ₹1.50 lakh earnings tax profit to dwelling mortgage debtors, who purchase their first property paying stamp obligation as much as ₹45 lakh. Later in finances 2020 and 2021, this facility was prolonged for yet one more 12 months respectively. However, in response to tax and funding specialists, if a contemporary dwelling mortgage borrower will get dwelling mortgage sanction letter by thirty first March 2022 and will get disbursal in FY23, she or he would have the ability to declare this extra earnings tax exemption profit on as much as ₹1.5 lakh dwelling mortgage curiosity fee in a single monetary 12 months for total tenure of the house mortgage.

    Speaking on how an earnings taxpayer nonetheless has a chance to say this profit whereas submitting earnings tax return (ITR); Mumbai-based tax and funding knowledgeable Balwant Jain mentioned, “While filing ITR from next financial year, a taxpayer will not be able to claim income tax benefit under Section 80EEA as this tax benefit ends on 31st March 2022. However, in case, a taxpayer is mulling to buy its dream home next fiscal, it still has a chance to avail this benefit of income tax exemption on up to ₹1.50 lakh home loan interest payment in single financial year.”

    Highlighting the window of alternative accessible for an earnings taxpayer, Balwant Jain mentioned, “A home loan borrower can claim income tax benefit under Section 80 EEA, if it has a home loan sanctioned in between 1st April 2019 to 31st March 2022. So, if a new borrower receives home loan sanction letter by 31st March 2022 and gets disbursal in next fiscal, he or she will be eligible to claim income tax benefit on up to ₹1.50 lakh home loan interest paid in one financial year under Section 80EEA.”

    Echoing with Balwant Jain’s views; Pankaj Mathpal, MD & CEO at Optima Money Managers mentioned, “This facility will be available for a home loan borrower for entire tenure of the home loan provided the borrower is a first time buyer and he or she doesn’t own any property. Most importantly, this benefit is available on under construction property’s home loan EMI repayment as well whereas under Section 24(b), a home loan borrower can claim income tax benefit on up to ₹2 lakh interest payment after getting possession of the property.”

    As per the earnings tax guidelines, from 1st April 2022, a house mortgage borrower will get two earnings tax advantages below Section 24(b) and Section 80C of the Income Tax Act. Under Section 24(b), a house purchaser can declare earnings tax deduction on as much as ₹2 lakh in a single monetary 12 months on the curiosity part of its dwelling mortgage EMI. However, this profit might be claimed after getting possession of the property. Under Section 80C, debtors can avail a tax advantage of as much as ₹1.5 lakh on the principal quantity paid by means of dwelling mortgage EMI.

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  • PPF vs NPS funding: Which is best to construct retirement corpus? Details right here

    PPF vs NPS: Public Provident Fund or PPF is among the restricted risk-free funding software that may yield larger common fee of inflation as PPF rate of interest as we speak is 7.10 per cent each year. While PPF is totally a debt instrument, National Pension System or NPS scheme is a mixture of each fairness and debt the place an investor can select as much as 75 per cent fairness publicity on one’s funding. According to tax and funding consultants, if an investor is in no temper to take any threat, then opening a PPF account is best possibility whereas an investor who is able to take some threat, NPS account can be an acceptable possibility for such investor.

    Speaking on PPF vs NPS funding; SEBI registered tax and funding knowledgeable Jitendra Solanki mentioned, “If an investor has zero risk appetite, then PPF is suitable for such investor as it is 100 per cent risk-free and one can remain assured about one’s PPF return whereas NPS scheme is mix of both equity and debt investment. So, an investor who is ready to take some risk should go for NPS scheme as it would yield more in comparison to PPF in long term.”

    PPF vs NPS: Income tax advantages

    Jitendra Solanki mentioned that each PPF and NPS permit revenue tax exemption in funding as much as ₹1.50 lakh underneath Section 80C of the revenue tax act. However, in NPS, there may be further revenue tax rebate obtainable underneath Section 80CCD. Under Section 80CCD, a taxpayer can declare tax profit on as much as ₹50,000 invested in a single’s NPS account in single monetary 12 months. So, if an investor is able to take some threat, ought to put money into NPS forward of PPF as it might permit her or him to assert a further revenue tax profit on as much as ₹50,000 funding aside from ₹1.50 lakh underneath Section 80C.

    PPF vs NPS: Interest fee

    Speaking on anticipated return in PPF and NPS; Kartik Jhaveri, Director — Wealth at Transcend Capital mentioned, “In PPF, interest rate is announced on quarterly basis and compounded on yearly basis. So, PPF interest rate is subject to change on quarterly basis whereas in NPS account, the investor has option to choose one’s equity exposure. One can choose up to 75 per cent equity exposure in NPS account. So, one’s investment in PPF is 100 per cent debt investment whereas one’s NPS investment is a mix of debt and equity. If an investor chooses 60 per cent equity exposure and 40 per cent debt exposure, in that case equity investment is expected to yield at least 12 per cent per annum in long term whereas debt exposure may yield 8 per cent in long term. So, net NPS interest rate expected in 40:60 debt-equity ratio is 10.40 per cent (7.20 in equity and 3.20 in debt exposure). Thus, compared to PPF account, one’s retirement corpus will grow 3.30 per cent faster in NPS in long term.”

    Jhaveri mentioned that if an investor retains debt-equity publicity in 50:50 ratio, in that case NPS return can be 10 per cent in long run, which remains to be 2.9 per cent larger from present PPF rate of interest of seven.10 per cent.

    PPF vs NPS: Which is best

    So, PPF is appropriate for these traders who’ve zero threat urge for food. However, if an investor is able to take some threat, NPS is best because it provides round 3 per cent to three.30 per cent larger return. Apart from this, NPS account holder can declare revenue tax profit on as much as ₹2 lakh funding in single monetary 12 months whereas this profit in PPF is capped at ₹1.50 lakh on a single fiscal.

    However, tax and funding consultants maintained that it is risk-appetite of the investor that will resolve which funding software is best not the return in long run as each have the capability to beat the common fee of inflation, which falls round 5-6 per cent in long run.

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  • Can I get tax profit on residence mortgage throughout pre-construction interval?

    I’m employed in a PSU financial institution. I had booked a flat in Dehradun in 2017 by taking a house mortgage of ₹39 lakh. Till now I’ve not bought possession of the flat. Please advise whether or not I’m eligible to say earnings tax profit throughout pre-construction interval in respect of curiosity paid in the direction of residence mortgage. 

    – Alok Kumar

    In accordance with Section 24 of the Income Tax Act, 1961 (hereinafter known as ‘the IT Act’), the taxpayer wouldn’t be allowed to say the advantage of curiosity deduction except the development of the property is accomplished. Such curiosity which is paid by the taxpayer from the date of borrowing the housing mortgage to the tip of the monetary 12 months instantly previous the 12 months by which development is accomplished is often often called pre-construction interval curiosity and such pre-construction interval curiosity might be claimed as deduction in 5 equal instalments commencing from the 12 months by which the development is accomplished. Thus, with impact from the monetary 12 months by which the development is accomplished, the taxpayer can declare for each the curiosity paid throughout such 12 months in addition to the instalment of the pre-construction interval curiosity. However, such mixed curiosity deduction shouldn’t exceed the utmost threshold restrict as talked about in S. 24 of the IT Act. Further, the principal element of the mortgage repaid might be claimed u/s 80C of the IT Act although the identical is paid through the pre-construction interval.

    However, Section 80EEA of the IT Act offers for claiming of curiosity paid on housing mortgage as much as Rs. 1,50,000 (regardless of the restriction imposed by S. 24 on the pre-construction interval curiosity) on fulfilment of the next circumstances:

    (i) The housing mortgage has been sanctioned through the interval commencing from 1st April 2019 and thirty first March 2022.

    (ii) The stamp responsibility worth of the residential home property doesn’t exceed ₹45 lakh.

    (iii) The particular person taxpayer doesn’t personal any residential home property on the date of sanction of mortgage.

    Thus, if the person taxpayer is fulfilling the circumstances as talked about in S. 80EEA of the IT Act, he can be eligible to say the curiosity deduction even within the pre-construction interval.

    -Dr. Suresh Surana, Founder, RSM India. 

    (Send your queries at [email protected])

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  • Have ₹10 lakh in hand? Should you prepay house mortgage or spend money on mutual funds?

    Ravi Ujjwal is a 40 yr previous skilled and he has ₹10 lakh surplus quantity in hand. Now, he’s in confusion whether or not to prepay house mortgage or go for mutual funds funding. In truth, Ravi is just not the one private who come throughout such scenario. There are big numbers of incomes people who need to repay house mortgage at any time when they’ve surplus quantity in hand. They have a perception that popping out of mortgage reimbursement burden must be in the beginning goal of their portfolio administration. However, if we have a look at tax and funding consultants’ views, they assume simply reverse of it.

    According to tax and funding consultants, house mortgage rate of interest could be round 8 per cent whereas mutual funds rate of interest that one can anticipate in long-term or say 10 years or extra could be a minimum of 12 per cent. So, persevering with with house mortgage EMI and selecting mutual funds as a substitute of house mortgage prepay is a greater choice for an incomes particular person. Experts went on so as to add that persevering with with house mortgage EMI helps save revenue tax outgo as nicely.

    Mutual funds vs house mortgage EMI

    Advising traders to proceed with house mortgage EMI and make investments surplus quantity in mutual funds; Pankaj Mathpal, Founder & MD at Optima Money Managers mentioned, “If someone has taken home loan for 20 years, he or she must remember that majority of the EMI portion comprise home loan interest in first 5 years. So, prepaying home loan after paying most of the interest part won’t be a wise decision. And one must remember that home loan EMI payment and mutual funds investment are two different aspects of portfolio management and they needs to be treated differently. Home loan interest rate would be around 8 per cent whereas mutual funds return calculator suggests that in long-term, one can expect at least 12 per cent return on one’s mutual fund investments. So, it’s better to continue with home loan EMI and invest the surplus money in mutual funds.”

    Income tax profit

    Highlighting the revenue tax profit in selecting mutual funds as a substitute of house mortgage prepayment; Vinit Khandare, CEO & Founder at MyFundBazaar India mentioned, “On the flipside, continuing home loans EMI will get you income tax deduction benefits. Moreover, if more than half your tenure is over for your home loan, it doesn’t make any sense to prepay as majority of the interest component of the home loan has been already paid.”

    Eye on retirement planning

    On how mutual funds will allow an investor to create additional fund for retirement corpus; Vinit Khandare of MyFundBazaar India mentioned, “Assume keeping certain presumptions in mind – home loan interest rate of around 8 per cent and mutual funds RoR being 12 per cent – having ₹10 lakhs in hand, it will be beneficial for the investor to grow one’s money through mutual funds investment because it will enable investor accumulate promising corpus towards its retirement.”

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  • Can I get revenue tax profit on dwelling mortgage pay as you go and penalty charged?

    I’ve absolutely repaid my housing mortgage to LICHFL in December, 2020 for my self-occupied flat. The lender has additionally charged me a pay as you go penalty for this. Can I get any tax profit for quantity of mortgage repaid and the prepayment penalty?

    As per Section 80C an Individual is are entitled to a deduction upto Rs. 1.50 lakh in respect of quantity repaid in direction of reimbursement of dwelling mortgage taken from specified establishments. This deduction is not any essentially restricted to the part of principal reimbursement comprised in your month-to-month EMI however can also be obtainable for any half or full prepayment made throughout the yr. Please be aware that the mixture quantity of deduction obtainable underneath Section 80C shall not exceed Rs. 1.50 lakh regardless of the quantity of dwelling mortgage repaid by you.

    The deduction underneath Section 80 C for principal reimbursement of certified dwelling mortgage is obtainable together with numerous different funds like Life Insurance Premium, ELSS, NSC, PPF, Provident Fund and tax saving financial institution FD, tuition price for kids and many others.

    As regards declare of prepayment penalty paid by you, as per the provisions of revenue tax any price or fees paid in reference to the mortgage can also be handled as curiosity and subsequently it is possible for you to to say the quantity of processing price paid by you underneath Section 24(b) together with the quantity of curiosity paid by you throughout the yr however solely throughout the general restrict of Rs. 2 lakhs relevant for a self-occupied home property.

    Balwant Jain is a tax and funding skilled and will be reached on jainbalwant@gmail and @jainbalwant on Twitter

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  • HDFC Ltd fastened deposit: Can I avail revenue tax profit on curiosity?

    I’m a senior citizen and have made fastened deposit with HDFC LTD (NOT HDFC BANK). Please let me know whether or not the curiosity revenue acquired from HDFC Limited is eligible for exemption inside Rs. 50000 or not.

    As per Section 80TTB an individual, who has accomplished 60 years and who’s a resident of India for revenue tax functions, is entitled to assert a deduction of Rs. 50,000/- in respect of curiosity earned by him from Post workplace, Bank and Cooperative Societies in the course of the yr.

    This deduction is offered in respect of curiosity acquired from deposits of any nature made with these entities. So one can declare this deduction in respect of saving financial institution curiosity, curiosity on fastened deposits, curiosity on recurring deposits. Even you may declare this deduction for curiosity earned on deposits made below Senior Citizen Saving Scheme below this Section inside this total restrict of Rs. 50,000/-.

    Since this deduction is offered for curiosity acquired from specified entities and since HDFC Limited doesn’t fall in these classes, you can not declare this deduction. Had the deposits been with HDFC financial institution and never HDFC restricted, you’ll have been entitled to this deduction below Section 80TTB for curiosity acquired from HDFC financial institution. Since curiosity below Section 80TTB is exempt upto Rs. 50,000 is exempt, the resident senior residents take pleasure in the next restrict of Rs. 50,000/- for the aim of TDS on curiosity below Section 194A.

    Balwant Jain is a tax and funding knowledgeable and could be reached at [email protected] and @jainbalwant on his twitter deal with.

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