Home loan prepayment charges to be deductible under income tax
Pre-payment charges for home loan will be deductible under the head
'income from house property'. This means taxpayers can set them off
against other heads of income such as salary.
There is now another reason to repay your home loan.
According to an order by Mumbai bench of the Income Tax Appellate Tribunal, prepayment charges for home loan will be deductible under the head 'income from house property'. This means taxpayers can set them off against other heads of income such as salary.
The tribunal has said that both interest and prepayment charges come under the definition of housing loan interest.
"When we incorporate the definition of 'interest' in Section 24(b) (of the Income Tax Act), the position which emerges is that not only the amount paid designated as interest but also any other amount paid by whatever name called in relation to such debt incurred also qualifies for deduction," the tax tribunal said in its order.
The verdict will reduce tax liability of those who have prepaid property loans with 'income from house property'. The decision will help them claim deduction in the current assessment year as well as for previous years. A taxpayer can claim only one house as self-occupied and has to include income from the property (even if it is vacant) in the rest for tax computation.
For the current tax assessment year (when you file returns for financial year 2012-13), the deadline for filing income-tax returns is July 31.
In another development, the Central Board of Direct Taxes has notified income-tax return forms for the year.
In order to check evasion of wealth tax, ITR (Income Tax Return) 3 (for partners in firms and not carrying business or profession under any proprietorship) and ITR 4 (for those with income from a proprietary business or profession) require taxpayers to disclose domestic assets along with liabilities related to them. The disclosure is not required if the individual's income is less than Rs 25 lakh a year.
The definition of immovable properties include land and buildings, while movable properties include jewellery, art, vehicles, financial assets such as stocks, deposits and bank balances.
From this tax assessment year, individual taxpayers with total income of more than Rs 5 lakh in a year will have to file their tax returns electronically. Earlier, e-filing was mandatory only for individuals with annual income above Rs 10 lakh.
According to an order by Mumbai bench of the Income Tax Appellate Tribunal, prepayment charges for home loan will be deductible under the head 'income from house property'. This means taxpayers can set them off against other heads of income such as salary.
The tribunal has said that both interest and prepayment charges come under the definition of housing loan interest.
"When we incorporate the definition of 'interest' in Section 24(b) (of the Income Tax Act), the position which emerges is that not only the amount paid designated as interest but also any other amount paid by whatever name called in relation to such debt incurred also qualifies for deduction," the tax tribunal said in its order.
The verdict will reduce tax liability of those who have prepaid property loans with 'income from house property'. The decision will help them claim deduction in the current assessment year as well as for previous years. A taxpayer can claim only one house as self-occupied and has to include income from the property (even if it is vacant) in the rest for tax computation.
For the current tax assessment year (when you file returns for financial year 2012-13), the deadline for filing income-tax returns is July 31.
In another development, the Central Board of Direct Taxes has notified income-tax return forms for the year.
In order to check evasion of wealth tax, ITR (Income Tax Return) 3 (for partners in firms and not carrying business or profession under any proprietorship) and ITR 4 (for those with income from a proprietary business or profession) require taxpayers to disclose domestic assets along with liabilities related to them. The disclosure is not required if the individual's income is less than Rs 25 lakh a year.
The definition of immovable properties include land and buildings, while movable properties include jewellery, art, vehicles, financial assets such as stocks, deposits and bank balances.
From this tax assessment year, individual taxpayers with total income of more than Rs 5 lakh in a year will have to file their tax returns electronically. Earlier, e-filing was mandatory only for individuals with annual income above Rs 10 lakh.
