GOVT SAYS REVERSE MORTGAGE SCHEME IS TAX-FREE

Income earned by senior citizens by mortgaging their property to banks would not come under the purview of income tax, as the transaction does not amount to transfer of asset. "Reverse mortgage would not amount to transfer and the stream of revenue received by the senior citizen would not be income," the Finance Minister Mr P Chidambaram said while presenting the 2008-09 Budget yesterday. The scheme was notified by the housing finance sector regulator, National Housing Bank, last year to ensure economic security to senior citizens. Thereafter, many lenders and housing finance companies, including Punjab National Bank, Dean Housing and LI C Housing Finance launched such a scheme. Commenting on the Budget proposal, the HDFC Joint Managing Director, Ms Renu Sud Karnad said one reason for low demand for this scheme was the lack of clarity on the tax treatment. The amendments proposed in the Budget are a welcome move wherein the sche me will not be regarded as transfer of a capital asset and therefore would not attract capital gains tax. Secondly, the loan amount will be exempt from income tax for the borrower, she said, adding that no tax benefits have been extended to housing finan ce lenders in so far as reverse mortgages are concerned. - PTI – www.hindubusinessline.com