By Neeraj Agarwala
I switched to the new tax regime two years ago. Now, I have taken a home loan to buy a second property and will put it on rent. Can I revert to the old tax regime and claim full deduction on the interest amount?
—Deepak Kumar
An individual who has opted for the new tax regime can switch back to the old tax regime under certain conditions. Individuals without business income have the flexibility to switch between the two regimes every financial year while filing their Income Tax Return (ITR).
However, individuals with business or professional income can revert to the old tax regime only once after opting for the new regime. Once they switch back, they will not be allowed to opt for the new regime again in future years.
A taxpayer can claim a deduction under Section 24(b) for interest paid on a home loan for a rented property, without any upper limit under both the old tax regime and the new tax regime. This means that even under the new tax regime, you can claim deduction for interest on rented property. Since you had opted for the new tax regime two years ago, it is advisable to carefully compare your tax liability under both regimes before making a decision.
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My bank is reporting the quarterly interest amount on fixed deposit in my AIS. I will get the full interest and the principal at the time of maturity in April. Do I have to pay tax on the full amount again?
—Sanjay Uppal
When the FD matures, you will receive the total maturity amount (principal and cumulative interest). However, if you have already paid tax on the accrued interest each year, you do not have to pay tax on the full amount again at the time of maturity.
Cross-check the interest reported in AIS with your tax return to ensure that you are not paying tax on the same interest twice. If you have not reported the accrued interest in previous years and are recognising the entire interest income at maturity, then the full amount will be taxable in the year of receipt which may lead to higher tax liability.
The writer is partner,
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