Interest on borrowed capital for self occupied property

The maximum amount of interest permissible in cases of self-occupied property is ` 1,50,000 (in respect of funds borrowed on or after 01.04.1999). Interest upto ` 1,50,000 is deductible if the following conditions are satisfied:

• Capital is borrowed on or after April 1, 1999 for acquiring or constructing a property;
• The acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed; and
• The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principal amount outstanding under an earlier loan taken for such acquisition or construction.

In the above context the following further aspects have to be kept in view:

1. If capital is borrowed for any other purpose (e.g. if capital is borrowed for reconstruction, repairs or renewals of a house property), then the maximum deduction on account of interest is ` 30,000 (and not ` 1,50,000).
2. There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential unit could have commenced before April 1, 1999 but, as long as its construction/acquisition is completed within 3 years, the higher deduction of ` 1,50,000 would be available. Also, there is no stipulation regarding the construction/acquisition of the residential unit being entirely financed by the loan taken on or after April 1, 1999. It may be so in part. However, the higher deduction upto ` 1,50,000 can be taken for the loan which has been taken and utilized for construction/acquisition after April 1, 1999. The loan taken prior to April 1, 1999 will carry deduction of interest upto ` 30,000 only (CBDT’s circular No. 779, dated September 14, 1999).

` 1,50,000 maximum deduction will not be available in the following situations:

1. If capital is borrowed before April 1, 1999 for purchase, construction, reconstruction, repairs or renewals of a house property;
2. If capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and
3. If capital is borrowed on or after April 1, 1999 but construction is not completed within 3 years from the end of the year in which capital was borrowed.

In the above situations only deduction upto ` 30,000 can be claimed.

source: www.taxguru.in

Salaried Individuals with Total Income up to Rs 5 Lakh Exempted from Filing IT Return

Salaried individuals with total income up to Rs 5 lakh will be exempted from filing income tax return for the assessment year 2011-12.

The finance ministry notified the scheme on Thursday, which will allow only those individuals not to file an income tax return who are getting salary from a single employer with total income of Rs 5 lakh after allowable deductions, and interest income from deposits in a saving bank account up to Rs 10,000.

In his budget speech for 2011-12, Finance Minister Pranab Mukherjee had proposed to exempt salaried employees from filing tax returns in order to reduce the compliance burden on small taxpayers. According to the Memorandum to the Finance Bill 2011, the government was to be issue a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.

The Central Board of Direct Taxes has notified the scheme, under which such individuals (with income up to Rs 5 lakh) must report their Permanent Account Number (PAN) and the entire income from bank interest to their employer, pay the entire tax by way of deduction of tax at source, and obtain a certificate of tax deduction in Form No 16.

Individuals receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims shall not be covered under the scheme.

The finance ministry also stated that the scheme shall also not be applicable in cases wherein notices are issued for filing the income tax return under section 142(1) or section 148 or section 153A or section 153C of the Income Tax Act 1961.