Upon speaking with a couple of other people and my HR and doing some research, I am now confused. Would appreciate if my queries / doubts could be addressed though your column –

What is the total fringe benefit tax (FBT) on company-leased apartments? I have heard various opinions.

1. Perquisite value is 20% of rent paid (and hence FBT is 33.66% of that = 6.73% of rent paid).

2. Perquisite value is actual rent paid or 15% of salary, whichever is lower. That is naturally disastrous as FBT could be as high as 33.66% of rent paid depending on the salary cap number.

3. Perquisite value is 20% of salary in big cities like Mumbai. Again FBT then is like an additional 6.73% tax on total salary.

? Kalpesh

Employer provided accommodation is a Class A perquisite and hence chargeable to tax as a perquisite irrespective of whether the employer pays FBT or not. Also, employer provided accommodation will not be subject to FBT but instead will be taxed as a perquisite in the hands of the employee. Such tax is determined as per the provisions of Section 17 read with Rule 3.

The perk value in this regard (that will be added to salary), would be 15% of salary.

?Salary? for the aforesaid purposes means basic salary, DA (if applicable), bonus, commission, fees and all other taxable allowances (excluding the portions not taxable) and any monetary payment by whatever name called.

So basically, almost the entire salary will come into play for calculating the perk tax.

I am working with the Government of India. In our salary structure, the transport allowance is Rs 3,200. For the handicapped, it is doubled. I would like to know whether this full amount (Rs 6,400) is exempted or Rs 3,200 is exempted or Rs 1,600, which was kept exempted last year remain unchanged.

?Sivgami

An allowance for commuting between the residence and the place of duty is exempt up to Rs 800 per month. An employee who is blind or orthopedically handicapped with a disability of lower extremities, this limit is Rs 1,600 per month w.r.e.f. 1.8.97 (Notification 11100).

I was planning to do some investment for my daughter on her 1st birthday. My husband does not want to invest more than Rs 5,000-8,000 every year due to the current economic status.

Please could you advice me as to what I should invest in as I did not find the insurance/ULIP policies very rewarding. I don’t want to invest in equity due to the markets crashing.

? Rashmi Subu

An investment in PPF (Public Provident Fund) is very effective for catering to expenses required as your daughter grows up. PPF offers 8% tax-free every year and is an extremely safe investment. Also, it is a misconception that the lock-in period of PPF is 15 years. From the end of the sixth year you can start withdrawing money, if required.

1. Can a gift be given any number of times in the financial year or it should be given only once?

2. Am I required to have any documentation done for the gift if I am giving it to my parents (senior citizens) or my married son?

3. If the senior citizen receiving the gift does not have any taxable income and the amount being gifted is less than 10 lakh, is it necessary for him to have PAN, provided that he will invest the money with a proprietary/partnership firm who does not deduct TDS?

? R K Maru

1. You may give a gift any number of times during the year, there is no limit as such. Note that the gift has to be out of your post tax income i.e. there is no tax deduction available on making gifts. Also, gifts above Rs 50,000 to non-relatives are tax-free.

2. A letter offering the gift to your family member(s) and a return letter from such a member accepting the gift is good enough.

3. There is no requirement of having PAN in order to receive the gift.

I intend to sell my urban agricultural land (situated within municipal limit), which is still to date being used for agricultural purposes. Kindly advice how I can save capital gains tax. Can I purchase the agriculture land out of the sale proceeds in my name or in the joint names of my husband/sons or invest the amount in specified assets in the joint name of my husband/ sons? Can I deposit the proceeds in my savings fund account or joint account with my husband/sons? What proof shall I have to show to the IT department that it is agricultural land, if any time required?

? Kapoor

Agricultural income is tax-free in India. This includes capital gains arising out of the sale of agricultural land. There is an exception.

Agricultural land situated within 8 kilometres of the local limits of any municipality, notified area committee, town committee or a cantonment board and which has a population of not less than 10,000 is considered as a capital asset. Consequently, sales made of such lands situated within the limits, would attract tax as capital gains. [CIT v Shubhlata & Others 13TCR91 (1998)].

An agricultural land situated in a rural area is not a ‘capital asset’ u/s 2(14) and therefore, no capital gains can arise on its sale. However, if the original agricultural land was situated in an urban area, exemption u/s 54B can be claimed even by purchasing a land in rural area. Moreover, if this rural land is sold even within three years, there would be no capital gains, short-term or long-term.

The capital gains may either be long-term or short-term. The action of purchasing any other land, whether in urban areas or otherwise, within 2 years attracts Section 54B as long as the newly purchased land is used for agricultural purposes.

You may also use Section 54EC to save long-term capital gains by investing within 6 months the amount of capital gains in infrastructure-related bonds of NHAI or REC u/s 54EC. The lock-in period is 3 years. The ceiling on this investment is Rs 50 lakh per financial year.

You may also claim exemption u/s 54F by purchasing a residential house within 1 year before or 2 years after the date of sale of the old property. Alternatively, you may construct a residential house within 3 years after the date. Section 54F is applicable for other assets and requires the net sale proceeds (after the related expenses) to be reinvested. There is a precondition that the assessee should not own more than one residential house at the time of sale of the old property. The new house should not be sold for 3 years.

In the case of Section 54B or 54F, the amount which is not invested before the filing of returns for the year or the statutory last date for filing the returns, whichever is earlier, is required to be parked in ‘Capital Gains Account Scheme’ (CGAS) with a bank in India.

The authors may be contacted at wonderlandconsultants@yahoo.com