I-T Act restricts amount of deduction while taking loan for land

I am purchasing immovable property and am paying a deposit to a property developer. The only asset held by the developer is agricultural land in a rural area for the property development. It has been many years and the land has not been able to be re-zoned by the DDA and may never be. Can I avail the TDS exemption relating to "agricultural land in a rural area?" – Fahmida Khan

From your query, we understand that the payment of deposit is being made for purchasing a house property, that is, flat/ floor/ building and the land appurtenant thereto and not just a part of the agricultural land.

The purchaser of any immovable property is required to deduct tax at source (TDS) @1% if the consideration for such purchase exceeds Rs 50,00,000. However, no TDS is required to be deducted if the property purchased is agricultural land. As in your case, you would be getting a house property against the consideration, the exemption from deduction of TDS may not apply.

Is there any rule which says that a loan taken for a plot of land for constructing home is eligible for tax deduction only for two years after the loan is taken? – Sreedas K P

The Income-tax Act, 1961 (Act) provides tax benefits in respect of the interest and principal repayment of the loan taken for construction or acquisition of house property. The tax payer becomes eligible to claim deduction in respect of interest payment once the property stands constructed or acquired and the taxpayer obtains the interest certificate. In case the purchased/constructed property is occupied by the taxpayer for his residential purposes, such a deduction is limited to Rs 200,000 provided the property is purchased or constructed within five years. However, the same is restricted to Rs 30,000 if completion of purchase/ construction takes more than five years. Further, there is no limit to claim deduction of interest expense if the taxpayer rents out the purchased/ constructed property. In view of above, the Act restricts only the amount of deduction in the specified cases and not the period of availment of deduction.

Chirag Nangia, Director, Nangia Advisors LLP

Clear your doubts with regard to personal tax. Send your queries to personalfinance@dnaindia.net