I have a query related to Sec. 80C. I want to know whether investing in a company fixed deposit for five years or more is an eligible investment under Sec. 80C? I know that investing in a bank FD or post office term deposit etc. attracts the tax deduction but was not sure about company FDs.

Gupta

No, an investment in company fixed deposits does not attract any tax benefits. The tax benefit u/s 80C is limited to bank and PO FDs only.

Will the question of capital gain arise if a lateral shift is done from dividend option to growth option in a mutual fund?

Ghose

Yes, such a shift will certainly be construed as a transfer even if the shift is within the same scheme of the same mutual fund. Consequently, it will attract the provisions of the capital gains. Only a shift from dividend option to dividend reinvestment option is not considered as a constructive transfer.

A plot is in the name of my parents. Can I take a home loan on my name along with either of my parents with co applicant and avail the facility of Sec. 80C tax rebate on home loan EMI. I am the only son of my parents.

Mahesh

The answer is in the negative.

It will be rather difficult for you to obtain a loan as a principal borrower on security of a plot of land that does not belong to you, even if the owner of the land is a co-borrower.

Even if you succeed in doing so, the house, including the land on which it is situated, must belong to you for availing the benefit of a housing loan.

Can you elaborate on the various taxes applicable for mutual fund investments?

Patil

Your query is too much general in nature. Nevertheless we shall try to provide an answer with a hope that it will satisfy you.

STT is payable on transactions in equities traded on a recognised stock exchange in India.

There are following three tax concessions on such transactions —

Dividend is tax-free in the hands of the investor in all the cases, equities as well as all the schemes of MFs. However, there is a DDT @ 16.995% in the case of equities and @14.165% payable by the debt-based MF scheme before the dividend is paid to the investor. Any Money Market or Liquid scheme of MFs suffers whopping DDT of 28.325%!!

The long-term capital gain (LTCG) for shares sold on recognised stock exchanges and equity based units of MF sold to the MF is exempt and therefore, it cannot be setoff against any other losses, including the carried forward losses of yesteryears. Consequently long-term capital loss (LTCL) is also exempt and is not available for any setoff

The short-term capital gain (STCG) for the same enjoys the concessional flat rate of tax @15.45%.

Equity-based MF schemes (65% or more exposure to equities and equity-related instruments) are unique in enjoying non-applicability of dividend distribution tax (DDT) besides the three concessions mentioned above.

In the case of ELSS, there is an additional benefit of deduction u/s 80C.

Where LTCG and STCG is taxed at concessional rates, the assessee will not get any deduction u/s 80C, 80D etc., against these gains which will be treated as a separate block.

I own a house for which I pay EMI. The interest component of the EMI is around Rs. 2.50 lakh p.a. I have rented out the place for Rs. 15000 p.m. I stay in another rented apartment paying a rent of Rs. 12,500 p.m. Can I claim deduction against my HRA?

Abhishek

There are only two situations under which the exemption on HRA cannot be claimed:

* The residential accommodation occupied by the assessee is owned by him ; or

* The assessee has not actually incurred expenditure on payment of rent in respect of the residential accommodation occupied by him.

In your case, you do not own the premises occupied by you and you pay rent for that accommodation. Hence you pass both the tests and are free to claim the exemption on your HRA as per the rules. The deduction on interest of housing loan is independent of HRA. Therefore, you can claim deduction for the interest paid on housing loan separately against the income from the house property.

In the case of HRA, the least of the following is exempt from tax u/s 10(13A) :

* 40% of salary (50% for Mumbai, Kolkata, Delhi and Chennai).

* HRA for the period the house is occupied by the employee.

* The excess of rent paid over 10% of salary.

?Salary? includes DA if the terms of the employment so provide, but excludes all other allowances and perquisites.

In the case of HRA, the least of the following is exempt from tax u/s 10(13A) :

* 40% of salary (50% for Mumbai, Kolkata, Delhi and Chennai).

* HRA for the period the house is occupied by the employee.

* The excess of rent paid over 10% of salary.

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