I had taken a housing loan in 2004 for the purchase of a flat and have been claiming deduction on the interest and principal component under Sections 24 and 80C. I have now taken another loan of Rs 25 lakh for the purchase of a house for which the EMI begins in June. I have till date paid only pre-EMI interest. Please clarify if pre-EMI interest qualifies for deduction. Can I claim deduction for the interest component for both loans? The first house has been rented out and the second one is under construction, to be handed over in December 2012.
C.P. Sriram
Secunderabad
If the house is delivered by the end of FY13, you can claim deduction for pre-EMI interest paid in the previous year (fiscal 2012) in five equal instalments beginning fiscal 2013. However, any pre-EMI interest paid during the year of completion will be allowed during the same year. Since the first house was let out, you can claimfull deductions for both the interest and principal co-mponent. You can claim a loss on house property for the second house, if it is self-occupied, up to Rs 1.5 lakh. The loss can be set off against your overall income.
My wife, who is a home maker, has earned interest income due to fixed deposit sweep-in facility in her savings account. Apprehending that she would be subject to TDS (tax deduction at source) under Section 194A, if the interest on the fixed the deposit portion touches Rs 10,000 limit, she withdrew a substantial amount from the account.
However, the bank told her that she was credited with interest of Rs 10,307 in FY12. Of this, Rs 3,341 was the interest on the fixed deposit portion and hence it has deducted a TDS of Rs 668. I believe TDS would be applicable only if the interest on FD exceeds Rs 10,000. Please clarify.
Ch. V Suryanarayana
Secunderabad
Your interpretation is correct and the bank is supposed to deduct TDS only when the interest paid on fixed deposits exceeds Rs 10,000. In your case, the bank is wrong in deducting TDS as the interest on FD was lower than Rs 10,000. Even if we read Section 194A with Section 206AA which prescribes higher rates of deduction in the cases where the payee has not furnished his/her PAN number to the deductor, the provision of Section 206AA shall apply only when the threshold limit of Rs 10,000 is crossed.
Since they have deducted tax at the rate of 20 per cent, I feel that they have misinterpreted Section 206AA. Now the only course of action available to you is to file an income return and claim the TDS as refund due.
Harsh Roongta is the CEO of Apnapaisa.com.
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