I want to purchase a flat in Pune. The cost of flat will be funded by 3 means i.e. 1/3rd by mother, 1/3rd by myself and remaining through a housing loan. In this context I have following queries: 1) Can I add my mother as co-owner of the property since she will be paying 1/3rd of the cost of property? 2) Can I avail housing loan only on my name (since I only will be paying EMIs) even if my mother is a co-owner? 3) Can I pay rent to my mother who is a co-owner of the flat? 4) Can I claim tax deduction of HRA on the rent paid to my mother and also the interest paid to bank for housing loan?
1.Yes you can do that
2. Yes you can avail Housing loan even if your mother name is included. She will be taken as coapplicant as she is also a part of sale deed.
3. No we dont suggest to show that you are paying rent to your mother. There wil be legal issues.
4. You can claim interest on housing loan for your part contribution.
Regards
CA Shyam
Dear Sir,
1. Yes, You can surely add your mother as a Co-owner while purchasing the property.
2. Yes, You can claim the benefit of Housing Loan solely on your name, and any excess benefit left out can be claimed in the name of your mother.(if required)
3. Preferably not, as it will be too difficult to prove and convince the tax authorities and would involve unnecessary hassles.
4. If You are not showing rent paid to mother, then you cannot claim tax deduction of HRA but can only claim interest paid to bank as housing loan.
Trust this clarifies your query.
Feel free for any further clarification.
Thanking You.
Regards,
CA Rohit R Sharma
BCOM, CA, LLB-GEN, CERT FAFP.
Thanks Mr Shyam and Mr Rohit for your answers and advise. For point # 3, since my mother will be co-owner for 30-50% of the property which I will get mentioned in the necessary property documents, doesn't that give her the right to let out her portion of property? And if yes, she can let it out to anyone...including her son? I can enter into a leave and licence agreement with her for the same. Will that still not suffice from Tax Laws perspective?
Dear Sir,
The point here is not about her right to let it out but about the IT buying what you are selling. For him it will be a clear case to avoid Tax and no Income Tax Officer will accept this as they thing only from the Revenue Point of View.
But Yes, if you file an appeal to the Tribunal, they may consider your case but that again involves the cost of hiring a Professional.
So you can continue with your plan of Rent Agreement, only if you are comfortable shelling out the cost and recover the same with the Tax Saved. If the amount of Tax Saving is not a competent figure then I would still advise not going for it.
Trust this clarifies your query.
Feel free for any further clarification.
Thanking You.
Regards,
CA Rohit R Sharma
BCOM, CA, LLB-GEN, CERT FAFP.
Thanks a lot
Dear Sir,
Please find my my personal opinion as follows:
1. Yes you can add your mother as a co-owner of the propoerty.
2. Yes you can avail housing loan on your name and make payment from your bank account and claim deduction in your return of income.
3. Yes, you can pay rent to your mother but only to the extent of 1/3 area of the house which is specifically owned by your mother and that area should be easily identifiable.
4. Yes, you can claim HRA for rent paid to your mother for her share of property and also claim deduction for interest paid for your housing loan.
See in your case we dont suggest that as this will have legal implications of whether the officer accepts the same or not
You are welcome Sir :)
I think this question is already answered by CA Shyam and CA Rohit. I would like to add that payment of rent to your mother, who is a co-owner of the house along with you will necessitate establishment of facts with documentary evidences and the cost of doing so may far exceed the tax savings.
As per section 26
Where property consisting of buildings or buildings owned by two or more persons and their respective shares are definite and ascertainable, income is calculated as per section 22 to 25. In your case share is not specified.
I think this question is already answered by CA Shyam and CA Rohit.
