l Can I invest the money I get from selling a flat in Jaipur to buy a plot of land in my hometown? I intend to construct the house on the plot after five years.—Atul Kapoor
The sale proceeds from a residential flat can be used to purchase a plot for constructing a residential house. However, to claim exemption from long-term capital gains tax under Section 82 of the Income-tax Act, 2025 (Section 54 of Old Income-tax Act), the residential house must be constructed within three years from the date of transfer of the original flat. Therefore, if the intention is to purchase the plot now but construct the house only after five years, the conditions for exemption under Section 82 would not be satisfied.
Further, if the capital gains are not utilised before the due date for filing the income-tax return, the unutilised amount may be deposited under the Capital Gains Account Scheme (CGAS), but that does not extend the statutory time period available for construc-tion of the residential house. Accordingly, purchasing the plot can be part of the reinvestment, but the proposed five-year timeline for construction would not qualify for the capital gains exemption.
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l My wife and I have taken a joint home loan of Rs 50 lakh. How do we divide the interest? Can we both claim deduction of Rs 2 lakh each?—Prabhakar Rao
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Yes, both spouses can claim a deduction for home-loan interest, provided they are both co-owners of the property and co-borrowers of the loan, and each bears the corresponding share of the interest. Under Section 22 of the Income-tax Act, 2025, for a self-occupied property, each co-owner can claim a deduction for interest on borrowed capital up to Rs 2 lakh. Thus, if the Rs 50 lakh loan and property ownership are equally divided and the interest is also borne equally, both spouses can claim up to Rs 2 lakh each, resulting in a combined deduction of up to Rs 4 lakh. The deduction should be claimed in proportion to the ownership/loan share and actual interest borne by each spouse; merely being a joint borrower does not automatically entitle both to Rs 2 lakh each.
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l Do I have to pay any tax if I transfer some units of mutual funds to my brother?—Ajit Puri
The transfer of a capital asset by way of a gift to a brother is not regarded as a transfer for tax purposes and does not trigger capital gains. The tax will apply only when your brother sells the units. He will use your original cost and your original holding period to compute the gain. You may still need to maintain proper documentation, such as a gift deed, to support the genuineness of the transfer.
The writer is managing partner, AKM Global, a tax and consulting firm. Send your queries to fepersonalfinance@expressindia.com
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Investors should assess their financial goals, risk appetite and consult a qualified financial advisor before making investment decisions.
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