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You have a question about house rent allowance, medical allowance or even a general tax query.
Here's where we step in with our experts, Relax With Tax.
- Got a question for Relax With Tax? Please write to us!
How is tax calculated in case the property was allotted in, say, 1975, but the registration was done in 2003?
Is it long term or short term?
Is the duration of the property held calculated from the date of allotment or registration?
- Rahul Kapoor
Generally, the essential ingredients for a sale transaction are mutual agreement, competent parties, money consideration and transfer of general or absolute property from the seller to the buyer.
In your case, let's say you had the right to use the property as you wished from the date of allotment. Then, such an allotment would be considered as the date on which ownership has passed on.
However, you are advised to consult your lawyer to ensure this.
If your allotment took place in 1975, then the property would be considered to be of a long term nature.
Please read the following links.
Currently, I stay with my parents and pay them House Rent Allowance.
I am planning to buy a house so that my wife and I can move into it.
1. If I buy the house on my name and avail the tax benefit on the home loan, I lose the HRA benefit.
2. Should I take the home loan in the name of my wife and retain the HRA benefit? Even then, I will have to be the co-applicant since my wife has no income.
Also, I feel the benefits of HRA are more substantial than those from a home loan, especially if I look at a home loan for 10 years or so.
I plan to buy a home costing Rs 35 lakh (Rs 3.5 million) but will get a loan for just Rs 20 lakh (Rs 2 million), so I have to part with a fair amount of money.
- Rajat Basu
I don't think we fully followed your question. If you plan to move into your own home, the question of HRA just does not arise.
What is HRA?
House Rent Allowance is a component of your salary package. This allowance is given by an employer to an employee to meet the cost of renting an accommodation.
When is it valid?
If you pay no rent either because you stay in a rent-free accommodation or live with your family or in your own house, you will not get this benefit.
This benefit is also not available if the rent you pay does not exceed 10% of your salary.
In order to claim HRA, the following minimum conditions should exist:
1. You should be staying in a rented accomodation.
2. The house should not be owned by you.
3. You should be paying the rent.
4. This rent must be in excess of 10% of salary (salary, in this case, includes your basic salary + dearness allowance).
If these conditions are satisfied, the HRA benefit is available to you.
The primary condition for availing the HRA benefit is that you should be living in a rented premise not owned by you.
Paying rent to family
You say that you are paying rent to your parents.
It would be advisable for the landlord, in this case your parent, to declare this income in his/ her personal Income Tax return. This will prevent any litigation in the future.
Some individuals want to pay rent to their spouse.
However, the relationship between a husband and wife is not commercial in nature. After all, a husband and wife are supposed to stay together.
Hence, payment of rent to a spouse may not be accepted by the income tax authorities. They may view this as a sham transaction to avoid tax.
Home loan benefits and HRA
To avail deduction for loan repayment, you need to have acquired/ constructed the house property with borrowed funds.
However, it may be possible that, due to reasons of employment, there could be a situation wherein you stay in a rented property even though you have own property. In such a case, you could avail of both benefits at one go.
The question of claiming both HRA and deduction on account of loan repayment has shades of grey. The decision needs to be made based on the facts of your case.
Please read Claim home loan benefits, HRA.
In your question, you asked to compare the benefits of HRA vis-a-viz a home loan. Do note, when you take a home loan, the period is for a long time, maybe 15 to 20 years.
There are numerous variables that may be needed to be considered during this time frame.
The rates of tax may undergo an upward/ mostly downward revision over this time frame. The future of the tax benefit on HRA and home loans is unknown over that time frame.
You must go in for an option that gives you the best tax advantage as of right now. Forget about the future.
Got a question for Relax With Tax? Please write to us!
Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.
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Illustration: Dominic Xavier
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