In my opinion, you can claim the benefit of long-term capital gains on MIPs at their maturity. The choice between 10 and 20 per cent is available only in the case of shares and securities. Units of UTI/MFs are not securities.

My problem is related to HRA, house loan and taxation. I'm getting a gross salary plus HRA of about Rs 2.4 lakh per annum (HRA is Rs 40,000 per annum). I wish to buy a house with a loan (as suggested by you) of Rs 5 lakh to Rs 6 lakh from HDFC. The remaining cost of thehouse will come from my savings. My wife is a private practitioner, but not a tax payer.

If I buy a house in our joint names, can I get the full Rs 75,000 deduction on interest paid? Further, I want to avail of exemption of HRA u/s 10 by paying rent to my wife. Is this possible? Please advise whether I should buy the house jointly.
Sanjay, GHAZIABAD

Yes, it is a good idea, but you may not be able to put it in practice.i) Your wife should have sufficient funds to be able to contribute her part of the purchase proceeds on her own.
ii) This problem can be overcome by you giving her a gift, but then again, the rent paid by you to her for allowing you to use her part of the house will be clubbed in your hands.
iii) HDFC may not grant you any loan on an unpartitionable property, part of which belongs to your wife. In the case of default, HDFC will be in a position to evict you, but not the wife.

I understand that the government has raised the appeal fee for filing appeals before CIT (A) andITAT and such fees are based on the income assessed by the assessing authorities. I wish to state here that the concerned government department and even high-profile income tax advocates do not care to point out that an assessee suffers due to the present pattern of fee because the fee is charged on assessed income bases and not on disputed income basis.

Suppose the assessed income is Rs 10,80,000 and the returned income is Rs 10 lakh, the disputed income is only Rs 80,000 while the assessee will have to pay an appeal fee on Rs 10,80,000 which is tremendously high at both the appeal stages-CIT(A) and ITAT. Secondly, if the assessee wins the appeal, he still loses the court fee. In civil cases where the court fee is at about 10 per cent of the disputed amount and is payable by the opposite party in case the plaintiff wins the matter.
Pradeep Kumar Jain, SAHIBABAD

I was not aware of all this and if this has happened, people should file petitions in the public interest. It is a fact that directrepresentations to CBDT (or MoF) do not elicit any response. I am thankful to you for bringing this high-handed attitude to the notice of my readers.

If a non-resident Indian who had invested in a three-year NRNR account while he was an NRI and now has become a resident for the last two years, what is the tax status of the income on these NRNR deposits? These NRNR deposits are going to mature this year. Please advise on the tax liability.
Prakash Gidwani, pritmani@bom5.vsnl.net.in

Interest on NRNR becomes taxable when the NRI returns to India permanently and becomes a resident. It is taxable, even if he enjoys the status of a `resident but not ordinarily resident'. His intention in the instant case is immaterial and inconsequential. The interest is taxable on accrual basis. He has already been in India for the last two years and should have paid tax on the interest accrued in the account every year.

I agree with you that in the case of ULIP, the provisions of capital gains would be attractedat its maturity. However, the insurance premium paid by UTI to LIC for the first seven years on 10-year ULIP and for the first 10 years on 15-year ULIP cannot be treated as a part and parcel of its cost of acquisition. What are your views? Maturity bonus of Rs 500 has been converted into units. However, factually, UTI does not do it that way. It simply adds Rs 500 to the repurchase price of the total accumulated units. What are your views? What is the tax treatment of Rs 500? Is it income from other sources deductible u/s 80L?
Bakul Sheth, sheth.bakul@mahindra.co.in
As regards cost of acquisition, you have a point there but I do not agree with you. It is UTI that pays the insurance premium to cover your life. Your cost of acquisition is the money you have paid to UTI and what it does with it does not in any way affect your cost. For instance, it charges a certain fee for managing the affairs. Should this have any effect on your cost of acquisition? As regards the bonus, you have a point there andI agree with you in toto. Thanks for bringing the error to my notice. What is its taxability? The issue is open to debate. One view can be that the bonus becomes payable only if all the installments are paid and the account is carried up to its maturity, and therefore it should get spread over the entire tenure of the scheme (whatever this means).

A third argument is that this is a contractual obligation arising on the date of the very first contribution and therefore it should be treated as long-term capital gains at nil cost. It may also be argued that the bonus becomes payable if and only if the last installment is paid, and therefore, it should be construed as a short- term gain. I personally do not subscribe to these arguments. It is a part and parcel of the sale proceeds. Just subtract the indexed cost arrived at by applying the annual index on the annual dividends to arrive at the long-term capital gains. I thank you for bringing this controversy to surface.