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Gifts received from specific relatives are not taxable – check details

Prepayment of home loan does not entail any specific benefits whereas benefit on repayment of the home loan is provided by I-T Act.

By Chirag Nangia

I have given a cheque of Rs 10 lakh to my brother to spend for his marriage. Will he have to pay any tax on it?
-Pankaj Gupta
Gifts to relatives like your brother are not taxable in the hands of recipient. It is presumed that you have included this money in your income and paid tax on it.

I am planning to prepay my housing loan. Will I get any one-time tax benefit after prepaying the amount?
-Dipak Kumar
Prepayment of home loan does not entail any specific benefits whereas benefit on repayment of the home loan is provided by I-T Act. However, these benefits differ depending upon the timing of repayment of the loan, i.e., paid before or after the property is acquired. If repayment is made after the acquisition/ construction of property, total amount of principal paid in a financial year can be claimed as a deduction from gross total income under Section 80C before calculating net taxable income. Payment of interest can also be claimed as a deduction under Section 24 while computing income under head 'house property', up to Rs 2 lakh in case of a self-occupied property provided construction gets completed within five years from the end of financial year in which the property was purchased/ constructed. For a let-out property, no limit has been specified up to which interest deduction can be claimed. If repayment is made before acquisition/ construction of property, the benefit can be availed only with respect to interest payment. Any interest paid before the acquisition of property can be claimed as deduction in five equal instalments while computing house property income. The deduction can be claimed beginning from the previous year in which such property was acquired.

I have a non-resident external (NRE) fixed deposit in a private bank in Bangalore. Do I have to pay any tax on the interest earned on this?
-Gaurav
As per Section 10(4)(ii), interest income earned on NRE account is tax exempt if account holder is treated as a person resident outside India under Foreign Exchange Management Act (FEMA). Thus, taxability of interest earned on NRE FD account would depend on residential status of the account holder under FEMA. Such interest would be exempt if account holder is a person resident outside India and taxable if he is a person resident in India in accordance with FEMA provisions.

The writer is director, Nangia Advisors LLP. Send your queries to fepersonalfinance@expressindia.com