Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: VAT RATES :: TAX RATES - GOODS TAXABLE @ 4% :: cpt :: TDS :: due date for vat payment :: form 3cd :: VAT Audit :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: empanelment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India
 
 
News Headlines »
 Notification regarding extension of last date w.r.t submission of closing stock by dealer.
 Integrated Goods and Services Tax (IGST) Rules, 2017 (As on 15.11.2017)
 Central Goods and Services Tax (CGST) Rules,2017 (As on 15.11.2017)
  101st Constitution Amendment Act, 2016
 Pr. Commissioner Of Income Tax-6 Vs. Mccain Foods India Pvt. Ltd.
 Section 10 of the Income-tax Act, 1961
 Income tax returns filing: No tax on gift received from relatives in form of cash
 Income tax returns (ITR): Here is why you need to pay higher tax on other incomes
 GST Update On Issuance Of Debit Notes And Credit Notes
 How Mutual Fund Investments Can Help Save Income Tax
 Income tax returns (ITR) filing: Why small service providers need to get this benefit

Tax haze over reverse mortgage money
June, 08th 2007
For all those looking forward to a regular income through a reverse mortgage scheme post-retirement, there may be a dampener in the form of income tax. Uncertainty hangs over the stream of payments that borrowers receive as the Central Board of Direct Taxes (CBDT) is yet to clarify whether the payments should be treated as loan or income.

A reverse mortgage allows individuals to receive money in the form of regular payments as long as they live by pledging their homes to housing finance companies. The loans are repaid from sale proceeds.

After the finance minister announced the scheme in the recent budget, housing finance regulator National Housing Bank (NHB) released operational guidelines for the scheme last week. Many players, including banks, have shown keen interest in this new scheme even before the final guidelines were released.

However, a lack of clarification from the CBDT is expected to take the sheen off the scheme, if tax authorities take away a big sum out from their proceeds. In a reverse mortgage, the lender makes periodic payments, including lump sum payments, to the borrower. The payment stream flows from the housing finance company to the borrower which is the reverse of a conventional mortgage. The loan is often a percentage of the value of the property, depending on the age of the borrower. Unlike a conventional loan, the payment could be lump sum or made periodically or some tranches of committed line of credit which is mutually agreed by the borrower and the lender. In many countries, the payment received in return of execution of a reverse mortgage is considered as a `loan and not `income from the tax angle. However, in India, the tax authorities have still not come clear on the tax treatment.

As a result, many senior citizens are apprehensive about opting for reverse mortgages, according to sources.

Often, tax implications of proposals announced in a budget are clarified within the period that the budget is passed in Parliament. However, it has not happened in this case. This could also be because the operational guidelines for the scheme have just come out. According to a section of the market, there could be some tricky situation arising out of the structure of the scheme, which could be of disadvantage to the tax authorities.

For example, as per the reverse mortgage scheme, while the borrower gets the money against the asset he currently owns during his life time. There could be cases when the lender gets the money by selling the house only after the death of the borrower. However, as per the current tax law, a capital gains tax needs to be paid on deals over Rs 50 lakh.

And the onus of this payment is on the owner of the house. But, since the sale would happen only after the death of the owner, recovery of taxes would be difficult on property sale under such circumstances. But on the other hand, if the payment through reverse mortgage is treated as income, a chunk of the money will go away as taxes with very little left for the borrower.
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions