The Hindu Business Line : Joint ownership and deductions

A LOAN has been taken from a bank for purchase of a property owned jointly by a husband and wife. Their individual shares in the property, however, is not definite and ascertainable.

The husband repays the entire loan and also the interest from out of his income. Can the husband claim the interest as a deduction and also the rebate for the principal repayment?

If an assessee stays in a rented premise and the construction of the house is in progress can the interest on the loan taken be claimed as a deduction? Can the assessee also claim the rent paid as a deduction?

Should the employer take into account both the rental income and the interest deduction against such rental income for computing the tax to be deducted at source on the payment of salary?

Jayaraman

Reply

Where a property is owned by two or more persons and where their respective shares are definite and ascertainable the share of each such person in the income from the property is to be computed in accordance with Sections 22 to 25 and shall be included in their total income.

In the reader's case, if the shares of the reader and his wife are definite and ascertainable then, each of them will be entitled to a deduction under Section 24 in respect of interest on borrowed capital. Interest on borrowed capital is allowed as a deduction subject to the following limits:

Rs 30,000

Rs 1,50,000 if the capital is borrowed on or after April 1, 1999 and the construction or acquisition is completed within three years from the end of financial year in which the capital is borrowed.

This ceiling limit is applicable only if the property is self-occupied. If the property were let, the deduction in respect of interest can be claimed against rental income without any ceiling limit.

If a self occupied property is co-owned, there seems to be no prohibition on each of the co-owners claiming the deduction subject to the above limits.

If, however, there exists no co-ownership but only a situation where the wife has joined the husband as a co-borrower while the husband continues to pay the housing loan in full, the husband will be entitled to the deduction in full under Section 24 as also for the rebate under Section 88.

If the house is incomplete the question of claiming interest will not arise until such time as the construction is completed. This has been explained in the reply to the query raised by Mr J. Ganesh Kumar. There is no provision for claiming rent as a deduction.

For the purpose of tax deduction at source on salary, the employer can take into account any income or a loss being one under the head house property if particulars of the same are given by the employee to the employer in Form 12C.

The question of what the employer can take in computing the tax to be deducted will depend on the particulars given by the employee to the employer.

It may be noted that the provisions relating to tax deduction at source require that tax should be deducted at source by an employer only if the employee gives particulars of income to the employer.

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