pankaj (director) 08 December 2010

Private loan for purchasing property

I want to purchase a flat. I intend to mobilise a part of fund through home loan ,personal saving and liquidation of one of my existing residential plot.

For the liquidation(not sale) of the residential plot , I intend to take refundable security deposit from my father in law which will be interest free. In turn I want to make an arrangement wherein he will have a right to use my flat for residing for a period of ten years.The security will be refundable after 10 years.By doing so my requirement of owning a flat is fulfilled, my in laws requirement is fulfilled at a much lower cost .

1) What will be the tax implication of this arrangement?

2) What documentation do I need to prepare?

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2 Replies

A V Vishal (Advocate) 08 December 2010

In such case it will be presumed that you have received the rent for 10 years in advance and wil be taxed for the same in the year the income has accrued/received.

CA SANDEEP BANSAL (PARTNER) 10 January 2011

I DIFFER BY MR A V VISHAL ........AS PER SECTION 24 OF INCOME TAX ACT THIS HOUSE WILL BE TREATED AS DEEMED TO BE LET OUT AND ITS STANDARD RENT WILL BE TAKEN AS TAXABLE INCOME OFCOURSE AFTER DEDUCTING SD AND OTHER ALOWABLE EXP.U/S 24 IN THE HAND OF OWNER. THERFORE ARRANGEMENT OF GETTING INTEREST FREE LOAN AND PROVIDING RENT FREE HOUSE IS NOT GOOD CONSIDERING THE TAX IMPACT .