While there is no express clarity, both financial ownership and legal ownership of the property may be considered by tax authorities for determining the ownership of the property
I have taken a loan for construction of a house in joint capacity with my father. But I am not a co-owner. Can I get myself added as the co-owner now—as I have already taken the loan —to be eligible for tax deductions? Also, suppose a person purchases a stock, but at the time of liquidating the stock, the investor makes a loss. Is this loss amount tax deductible?
—Avtar
On your first query, a deduction for interest and principal repayment towards a housing loan is available under Section 24 and Section 80C, respectively. For the purpose of these deductions, you are required to be the owner of the property and the income from such property should be chargeable to tax in your hands under the head “income from house property".
While there is no express clarity, both financial ownership and legal ownership of the property may be considered by tax authorities for determining the ownership of the property. Accordingly, in case where you are not the legal co-owner of the property, the claim of the said tax deductions may be contentious.
Once you acquire the legal co-ownership, the deductions should be apportioned in the ratio of the respective funding done by your father and you towards the property or loan, within the specified limits. It may also be noted that both the deductions, can be claimed only after the construction is completed and possession of the property is received.
In case you are opting for the new taxation regime, deductions under Sections 80C and 24 for interest on loan taken for self-occupied property will not be available.
Further, for getting yourself added as a co-owner to the property now, you should seek legal opinion on the appropriate documentation, stamp duty implications and any other implications.
On your second query, the set-off of losses on the sale of shares will depend on the nature of the capital asset (Indian or foreign stock) and also the nature of capital losses (short-term or long-term) incurred from the sale of the stock. Capital losses are deductible only against capital gains during the year, as per the rules prescribed. Also, any unadjusted capital losses can be carried forward up to eight succeeding financial years for set off only against future capital gains.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Queries and views at mintmoney@livemint.com
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