MONEY MANTRA - User Queries

I-T EXEMPTION ON SECOND LOAN
I built my first house (self occupied) on loan and availed the I-T exemption due on the interest and capital of the EMI paid against the loan. I have now availed a second loan to buy a flat. However, I am yet to take possession of the flat. I would like to know if I am eligible for I-T exemption on the principal and interest element of the EMIs being paid against the loan till the time I have taken possession of the flat. If yes, to what extent? Is there any regulation regarding the time limit within which the flat is to be taken possession of from the date of sanction of loan to be eligible for exemption of tax on prepossession interest? For I-T exemption, what is the upper cap on the interest element of loan?
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The income-tax deduction for the interest paid on the housing loan during the pre-acquisition period (i.e. up to March 31 preceding the financial year in which the property has been acquired) can be claimed from the financial year (April to March) in which the acquisition is completed. One-fifth of the total interest can be claimed as deduction starting from the year of acquisition of the property till the next four years.
If the house is self occupied for residential purposes, a deduction of up to Rs 150,000 is available, provided the property was acquired or constructed with capital borrowed on or after April 1, 1999, and the acquisition is completed within three years from the end of the financial year in which the loan was taken. However, if the property is let-out or deemed to be let out, actual interest paid (without any upper limit) could be claimed as a deduction. As you have two houses, you will have to make a choice in respect of which property to be considered as self occupied and which one to be treated as deemed to be let out, unless you actually let out one house. The incometax deduction for the repayment of principal amount could be claimed from the financial year in which the property is acquired and not for the pre-acquisition period.




‘GIFT’ FROM ABROAD
What are the implications of getting money from abroad as gift from a friend/relative (who will take a loan in a foreign country) which I will be investing in FDs in Indian banks. At the end of tenure, I will repay the amount equivalent to his loan plus interest plus 50% profit. I want to know the profit/loss due to forex rate and high Indian interest rate. Further, I want to know if this is against FERA/FEMA?

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As per the provisions of the Income-tax Act, 1961, any money received as a gift by an individual without consideration from any person, in excess of Rs 50,000, in a financial year (April to March), is taxable in the hands of the recipient as ‘income from other sources’. However, if the money is received from the specified persons (like a relative, as specified under the I-T Act), or under specified situations (like marriage etc), the amount received is not taxable. As per the FEMA Act, a resident individual is permitted to receive foreign exchange as a gift from a close relative, subject to certain conditions. The interest earned on the FDs in an Indian bank would be taxable in India. If the money is to be sent back then a question would arise — whether it would be a gift when it is received or should it be treated as an overseas loan.