For a retired person, is it necessary to pay quarterly advance tax on the earnings out of investments in the FDs, securities, postal schemes, etc. or can he pay yearly tax once only in March of every year?

— YM Wadia

All taxpayers are required to pay advance tax in spite of the fact that most of their income is subject to TDS.

If the tax payable for the year is Rs. 5,000 or more (raised to Rs. 10,000 by the recent FA09), advance tax is payable without having to submit any estimate or statement of income to the ITO in 3 installments during each FY as follows :

On or before

15th Sept : 30% of estimated tax.

15th Dec : 60% less tax already paid.

15th Mar : 100% less tax already paid.

TDS is treated as advance tax paid.

I purchased a house on hire purchase basis in August 1980. The total cost of the house was Rs 49,521. The payment was made in monthly installments spread over a period of 12 years commencing September 1980 and completed in August 1992. I sold this house for an amount of Rs 12 lakh and the conveyance deed was executed in May 2009. Please intimate the long term capital gain and tax liability on the same.

Further, I purchased a society flat in January 2007. The last installment towards cost of this flat was paid in January 2009. Can this last payment be off set against the long term capital gain arising from sale of house mentioned above?

The tentative cost of the flat mentioned earlier is above Rs 30 lakh and the payment was made in installments spread over in years 2007, 2008 and 2009. Is the purchase of this flat required to be shown in the income tax return under schedule AIR?

—UR Gupta

Effectively, you have purchased your first house for Rs. 49,521 less, interest you have paid. This is the cost of acquisition and the date of acquisition is the date when you got the possession of the house. The fact that you have paid the price in installments is immaterial and inconsequential.

You can claim exemption u/s 54 or 54F by purchasing a residential house within 1 year before or 2 years after the date of sale of the old house. Alternatively, you may construct a residential house within 3 years after the date.

We believe you have sold your old flat in May 2009 and purchased a new house in January 2007. Since the requisite period of one year prior to sale to claim exemption has expired, you cannot claim the exemption u/s 54. We presume you had got the possession of the flat in January 2007.

Kindly note that these answers are dependent upon our correct understanding of your query.

Yes, you are required to show this transaction in your AIR since the cost of the flat is over Rs. 30 lakh.

My taxable income for FY 2008-09 (AY 2009-10) is Rs 169,072 (Salary income & interest income). I also have long-term capital gain (LTCG) on debt based mutual fund (FMP) of Rs. 10,245 (without indexation). My investments under Sec. 80C amount to the full Rs. 1 lakh.

Now my questions are::

a) What would be my tax liability? (Net taxable income will be only 69,072 excluding LTCG)

b) Do I need to pay tax separately on LTCG amount?

— B Trikha

If the data you have supplied is correct, your total income, inclusive of long term gains (with indexation) is less than Rs. 1,80,000. This is so even without taking into account your contribution to Sec. 80C.

Kindly note that :

1. U/s 112(1), For a resident individual or an HUF, where the total income as reduced by long-term capital gains on which tax is exigible falls below the tax threshold applicable to the assessee (Rs 1.80 lakh to non senior females, Rs 2.25 lakh to senior citizens and Rs1.5 lakh to others, (including HUFs) the gains would be reduced by the amount by which the total income so reduced falls short of the threshold and the balance of the gains would be taxed at the rates applicable. In short, where the tax liability arises only because of inclusion of such capital gains in the total income, tax is levied on the excess over the minimum taxable limit.

Your LTCG will be under Sec. 112(1) applicable.

2. An important aspect which is mostly misunderstood is that the capital gains are always computed with indexation. It is only the tax that can be paid @10.3% or @20.6%, whichever is less. In the case of zero-coupon bonds, the rate is 10.3% without indexation during the year of redemption or pre-mature withdrawal.

I am physically handicapped that is post polio on both limbs. I am working in a paper mill in private sector. My disability is @ 80% for which I have a certificate from medical authorities I want to know that which deduction to claim u/s 80U of Rs. 50,000 or Rs. 75,000?

— Neeraj Kumar Singhal

The disability is classified into two parts as defined under the Persons with Disability (Equal Opportunities, Protection of Rights and Full Participation) Act, 1996. Disability of over 40% is non-severe and the one equal to or over 80% is severe.

Since your disability is 80%, you are suffering from severe disability and therefore, you are entitled to a deduction of Rs. 75,000 u/s 80U.

Incidentally, a similar benefit is offered by Sec. 80DD for a resident individual or an HUF having a dependent relative/member suffering from a permanent physical disability (including blindness) or mental retardation is entitled to a deduction for medical treatment, training or rehabilitation of the dependent. The amount was Rs. 75,000 which has been hiked to Rs. 1,00,000 by the recent Budget. It appears that similar hike has not been effected in Sec.80U. I hope that the correction will be added at the time of passing of the budget by the Parliament.

?The authors may be contacted at wonderlandconsultants@yahoo.com