News & Views on Indian Real Estate

Wednesday, October 15, 2008

Sigh Of Relief For Senior Citizens

There is some good news for the elderly, the finance ministry has notified the Reverse Mortgage Scheme, which would exempt from tax the income they earn by mortgaging their property. This comes after finance minister, Mr. P Chidambaram's statement in this year's Budget that, "Reverse mortgage would not amount to transfer and the stream of revenue received by the senior citizen would not be income."Accordingly, the Central Board of Direct Taxes (CBDT) has now said that under the scheme, a capital asset would mean a residential house property which is located in India and individuals or married couples above 60 years of age will be considered as senior citizens. This means that the scheme will not be regarded as transfer of a capital asset and so would not attract capital gains tax. Also, the loan amount will be exempt from income tax for the borrower. "Reverse Mortgage means mortgage of a capital asset by an eligible person against a loan obtained by him from an approved lending institution," the CBDT said in its notification. Further, the loan under reverse mortgage should not be for more than 20 years. The CBDT notification comes into action from 15 April, 2008 and loans given in 2007-08 will also be given exemption.

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