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Rashmin Sanghvi & Associates

Chartered Accountants

220, 2nd Floor, Arun Chambers,
Tardeo Road,
Mumbai - 400 034,
Maharashtra, India.

Tel. Nos.: (+91 22) 2351 1878, 2352 5694.

Fax : (+91 22) 2351 5275.

Email : [email protected]

 
Home Articles Taxation         Share :

Budget 2016 Chapter J

Chapter J. Provisions for Individuals:

20. Relaxation in condition for deduction of interest from income from house property: [S. 24]
 

Under the existing provisions, deduction for interest paid on borrowed capital for house property is allowed. For self-occupied property (which is not given out on rent), the normal deduction is Rs. 30,000. For property acquired after 1.4.1999, a higher deduction of Rs. 2,00,000 is allowed. For the higher deduction, the condition is that acquisition or construction of the property should be completed within 3 years succeeding the year in which capital was borrowed.
 

It is now proposed to increase the time limit within which the acquisition or construction is completed from three to five years succeeding the year in which capital is borrowed.
 

For property given on rent, there is no limit to the deduction of interest. There is no change in this.
 

21. Special provision for arrears of rent and unrealised rent received subsequently:  [S. 25A]
 

The existing provisions related to taxation of income from house property provide separate tax treatment for “unrealised rent” and “arrears of rent”. The unrealised rent and arrears of rent are currently taxed in the year in which they are realised or received respectively. A deduction of 30% was allowed on receipt of “arrears of rent”. No such deduction was available for realisation of “unrealised rent”.
 

It is now proposed to bring uniformity in tax treatment by extending the benefit of standard deduction of 30% to realisation of “unrealised rent”.
 

22. Deductions in respect of rents paid: [S. 80GG]
 

Under the existing provisions, a deduction is available to an individual assessee in respect of rent paid for his home. This deduction is available to every individual who is employed but does not receive Housing Rent Allowance, and also to those who are not employed but have any other incomes. The deduction is available for rent paid in excess of 10% of the total income. The deduction is further restricted to 25% of the total income or Rs. 2,000 per month whichever is less.
 

It is proposed to increase this limit of Rs. 2,000/- per month to Rs. 5,000/- per month. Other conditions remain the same.
 

23. Deduction for individuals in respect of interest on loan taken for residential property: [S. 80EE]
 

The Act provided a deduction of up to Rs. 1 lakh in respect of interest paid on loan taken by an individual for acquisition of residential property subject to fulfillment of specified conditions. The deduction could be claimed in AY 2014-15 and 2015-16. (The deduction of Rs. 1 lakh is a total deduction over two years. It is not an annual deduction.)
 

It is proposed to grant the benefit of deduction for interest of upto Rs. 50,000/- per year. However, the deduction can be availed subject to fulfillment of following conditions:
 

(i) The loan has been sanctioned by a financial institution during FY 2016-17.

(ii) The amount of loan does not exceed Rs. 35 lakhs.

(iii) The value of residential house property does not exceed Rs. 50 lakhs.

(iv) The assessee does not own any residential house on the date of sanction of the loan.

 

The deduction under this section will be over and above deduction for interest on housing loan available up to Rs. 2,00,000/- under section 24 of the Act from income from house property.
 

If one interprets the language, the deduction is available under section 24 and also under section 80EE. However to take double deduction is not the objective. The logical way will be that the deduction will be first available under section 24 as it is a deduction available against the specific income. If anything is left, it can be claimed under section 80EE.
 

Further deduction of interest against house property income may result in a loss. This loss can be set off against other income. Whereas deduction under section 80EE will not be available if the person has losses.
 

Considering that all the conditions specified in the section are satisfied, the chart below explains how the deduction will be available under both sections.
 

Interest paid on Housing loan for Self-occupied property.

Section of Income-tax Act

 

Deduction available

 

Rs.

Rs.

1,50,000/-

24

1,50,000/-

2,00,000/-

24

2,00,000/-

2,40,000/-

24

 

80EE

 

2,00,000/-

 

40,000/-

 

3,00,000/-

24

 

80EE

2,00,000/-

 

50,000/-

 

 

24. No deduction to be made in certain cases from Rent: [S. 197A]
 

S. 197A provides that tax shall not be deducted, if the recipient furnishes to the payer a self-declaration in prescribed Form No. 15G or 15H. The person has to declare that tax on his estimated total income would be nil.
 

This benefit is presently provided only on certain payments. It is proposed to amend the provisions of this section to include rental payments referred to in section 194-I. Thus house owners who give their house on rent can give a declaration so that the tenants will not deduct tax at source.
 

It may be noted that the declaration can be given only by resident owners of house and not by non-residents.
 

This amendment will take effect from 1st June 2016.
 

25. Rebate of income-tax in case of certain individual: [S. 87A]
 

Under the existing provisions, a rebate equal to 100% of the tax or Rs. 2,000/- whichever is lower is allowed to an individual resident whose net total income does not exceed 5 lakhs.
 

It is proposed to increase the limit of Rs. 2,000/- to Rs. 5,000/- so as to provide relief to small taxpayers. The rebate shall now be lower of 100% tax or Rs. 5,000/-.