Relief for elderly: Income from Reverse Mortgage to be tax-free

The finance ministry has notified that the Reverse Mortgage Scheme would exempt from tax the income they earn by mortgaging their property.
Reverse mortgage would not amount to transfer and the stream of revenue received by the senior citizen would not be income.
"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 in its notification has said. Further, the loan under reverse mortgage should not be for more than 20 years.
Accordingly, the CBDT 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 will imply 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.
The CBDT notification comes into force from 15 April, 2008 and loans in 2007-08 will also be given exemption.