Ask us | ‘No I-T rebate on EMI for under-construction building’

Q. I have taken housing loan of ₹29.60 lakh from SBI in FY21 for purchase of a flat. Construction of the flat is on. My EMI has already started. I am a government employee. Can I get any income tax rebate for the EMIs of housing loan I am paying?

Jatinder Bhat

N. Sree Kanth answers:

A. With respect to principal component in EMI, the amount of principal repaid in the assessment year cannot be claimed as deduction under Section 80C as only 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. In your case, the building is still under construction and the apartment has not been handed over, whereby residential income accruing from the property cannot be charged under ‘Income from House Property’.

With respect to interest component in EMI, the interest paid on housing loan until the date of completion cannot be claimed as deduction in the year of payment of such interest. The interest paid until such completion is to be divided into 5 equal parts and each part can be claimed as deduction in the form of pre-construction interest from the year of completion of construction. 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).

Q. As per recent Budget proposals, pensioners aged 75 and above need not file I-T returns if the bank is deducting I-T on pension, and income on interest. I am 79, drawing pension from the Defence Pension Disbursement Officer, who deducts I-T due on my pension before crediting the same to the designated bank.

He sends me Form 16 which I attach while filing returns, where I include income on account of interest from bank.

How does the concession of not filing I-T returns apply in my case? Second, kindly explain the pre-filling of details of capital gains, dividend income, and interest from banks and post offices in I-T returns as mentioned in the Budget proposals.

K. Natarajan

A. A new Section 194P has been inserted via Budget 2021, whereby senior citizens aged above 75 years, receiving income only in the form of pension and interest from any account maintained in the same specified bank in which the pension is being received, can submit to the specified bank a declaration which contains applicable chapter VIA deductions, relevant rebate and statement that the assessee does not earn any other income except the pension and the interest income of the same bank. On receipt of the same, the bank will deduct the requisite TDS on the said income, thereby relieving the assessee the obligation to file the return.

The ITR’s utilities will be pre-filled based on your PAN with income in the nature of capital gains, dividend income, interest from banks and post office based on the TDS returns filed by the respective deductor and other sources such as depositaries/R&T agents/banks/financial institutions/companies paying dividends among others. However, the same is to cross-verified prior to filing of ITR.

Q. At the age of 79, I am unable to manage my rented out house, and decided to transfer it to my son by settlement. But he does not want the rent to be credited to his account. Please let me know if there is a procedure to credit the rent in either my name or my wife’s name and show it in our I-T returns.

V. Srikrishnan

A. Income from house property is accrued and taxed in the hands of the owner of the property. Once the settlement is done in your son’s favour, the rent received will be taxable in his hands only.

Q. My father, aged 56, had booked a flat in 2011, but as the builder did not hand over the flat, my father has now received principal and interest accrued as per the decree passed by the court. Please help clarify whether he is liable to pay any tax on the amount received and where the money received should be utilised?

Aakanksha Arora

A. The amount received as return of principal is treated as return of advance monies paid; hence there is no tax implication. Whereas, the amount received in the form of interest is to be treated as ‘Income from Other Sources’ and included in the total income accordingly. There are no restrictions on the utilisation of money received.

(N. Sree Kanth is partner, GSS Associates, Chartered Accountants, Chennai)

Q. There are multiple IRDAI regulations for consumers’ benefit. Many insurance companies have modified their plans to accommodate these rules and/or raised premiums for the renewal of existing policies. Can you please summarise which health insurance policies/companies are cheap and best in the current landscape?


K. Nitya Kalyani replies:A. Recent IRDAI regulations have been focussed on increasing coverage and removing some of the exclusions found in most health policies. It goes without saying that this will result in an increase in premium rates.

Almost hand in hand, IRDAI has designed a standard hospitalisation policy called Arogya Sanjeevani. Every company selling health insurance has to offer this standard policy mandatorily.

This is a model policy in the sense that you can take it as the reference point to learn about coverage and pricing.

In this scenario, I suggest you opt for this policy if the coverage, the sum assured, and the terms and benefits suit you.

Your next step in that case would be to see what your target insurer charges for the policy. Here you are likely to encounter a significant range of prices.

If the Arogya Sanjeevani terms are not suited to you, do some online shopping for the policy that has the benefits you seek. Now, if you compare the pricing, you will start getting a feel of the pricing matrix.

There is no one-size-fits-all in health insurance, or for that matter, in any kind of insurance. Neither is there much transparency or clarity on the reasoning behind benefits and pricing. Hence, you have to go through this process to get an understanding of what is on offer and what you would like to pick.

(K. Nitya Kalyani is a business journalist specialising in insurance & corporate history)

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