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Deduction for loan repayment in wife's name

A public sector employee had purchased a land in his wife's name and constructed a house taking a loan from SBT in 1995 and the house tax was being paid in his wife's name. He was repaying the loan from his salary and was getting income-tax rebate for principal amount and interest till 2005. But the new disbursing officer was denying his tax rebate after getting advice from a tax consultant. He wants to know whether he is eligible to get tax rebate for his loan repayment amount.

The question raised is an oft-repeated one and has been answered in these columns. The fact that the property may have been purchased by the assessee in his wife's name may not mean that the property belongs to her, unless he has intended it to be so. Sec. 3(2) of Benami Transaction (Prohibition) Act, 1998 which prohibits benami transactions makes an exception in respect of purchase of property in the name of wife or the unmarried daughter. It would be a permissible benami holding, unless he had intended that the property should belong to his wife or unmarried daughter. It should be possible for the assessee to establish that the intention is that it should remain as his property, which is best done by a declaration by the wife, that she has no interest in the property. The fact that municipal tax has been paid in the name of his wife does not make any difference because such taxes, and even other such obligations, will be in the name of the title-holder of the property.

Sec. 80C (and earlier Sec. 88) in sub-clause (xviii) of sub-section (2) provides for deduction for an amount repaid for purchase or construction of a residential house. No doubt, such house should belong to the assessee. In the circumstances, where the assessee's property is held in wife's name, such deduction need not be denied. If the disbursing officer has any misgivings on this issue, rightly or wrongly, the reader is not without remedy, since he can file his income-tax return claiming refund of excess deduction.

S. RAJARATNAM

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