Where house property is purchased using loaned funds, the owner is eligible for a deduction of Rs. 1,00,000 towards repayment of the principal amount of the housing loan. This deduction is however, subject to an overall cap along with various other prescribed investments under Section 80C of the Act. It is important to note that this benefit is not envisaged under the provisions of the new Direct Tax Code that will come into effect from April 1, 2012.
The benefit of interest deductions continue to exist in the proposed new Direct Tax Code.
The new Direct Tax Code also provides for similar exemption in respect of long-term capital gains.
In addition to the above, investment in a house property is also eligible for exemption from payment of capital gains subject to fulfilment of certain conditions. To avail this benefit, the taxpayer would have to invest/reinvest the capital gains for purchasing HP. Such exemption is available only if the capital gain is a long-term and arises due to transfer of any long-term capital asset.
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