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Income
tax has a great bearing on property transactions. The
number of property holders in a family should be more
so that each family member has a separate property in
his or her own name and thus separate taxable income from
property, if given on rent. While joint purchase of property
is possible, it should be ensured that each co-owner must
invest his own funds in the ratio of his/her ownership
of the property. Care should be taken to ensure that where
the persons are co-owners, the share of each person is
clearly mentioned in the document. Similar is the case
during inheritance of property.
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The best
option with regard to commercial property would be to
buy it in the name of a family member or business enterprise
and rent it to the user. It has the advantage of full
tax write-off for the ultimate user of the property in
respect of the expenditure on repairs and renovation of
the commercial property.
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With regard
to purchase of property for the purpose of business, profession
or vocation, the entire interest on the loan taken for
the property will be fully allowed as a deduction by way
of business expenditure (Section 36 of the Income-Tax
Act).
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It is
better for a business enterprise to purchase flats, apartments,
commercial office buildings rather than buying vacant
plots and then constructing thereon. The benefit in the
former case is that the firm can claim the benefit of
depreciation on the entire purchase consideration. The
Supreme Court also held that there is no depreciation
rate described for land.
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One residential
house or a portion of the residential house would be completely
exempt from wealth-tax without any upper monetary limit
of exemption. Further, urban land held by an assessee,
as stock-in-trade would not be subject to wealth tax for
a period of five years from the date of acquisition of
such land.
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Interest
on loan is allowed not merely in respect of the loan taken
by the tax payers for the construction of the house but
also when the property demands repairs or certain additions
to the building or construction of a new floor. The maximum
amount allowed as a deduction in respect of interest paid
on loan is Rs 150,000.
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Interest
payment would be allowed as a deduction whether the interest
is payable in respect of a loan taken from a financial
institution, employer, market, friend or a relative or
even from a close relative.
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The limit
of repayment of housing loan qualifying for rebate has
been raised to Rs 30,000.
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For those
who wish to provide immovable property to their children,
the best way, according to tax experts, is not to put
it in the name of the children but to create a 100 per
cent Specific Beneficiary Trust for the children. The
beneficiary of this Trust would be the children. The parents
could both be the trustees and manage this Trust.
