I work in the payroll department of our company. For current financial year 2009-10, we have paid advance tax in respect of fringe benefits granted to employees. However, now FBT has been discontinued and perquisite tax has been introduced. In such a situation, how is the advance fringe benefit tax to be treated? Can we ask for a refund or adjust it in any other manner?

?Mehta

CBDT circular No. 2/2010, dated 29-1-2010 addresses precisely this issue. The circular specifies that any installment of advance tax paid in respect of fringe benefits for assessment year (AY) 2010-11 (financial year 2009-10) shall be treated as advance tax paid by assessee concerned. In other words the assessee can adjust such sum against its advance tax obligation in respect of income for AY 2010-11 or in case of loss to claim such payment as refund

My friend has made capital gains of Rs. 80 lakh on sale of ESOP shares. The sale was in January 2010.

(1) Can he put Rs 50 lakh in REC bonds (u/s 54EC) in FY 2009-10 and Rs 30 lakh in REC bonds (u/s 54EC) next year i.e. FY 2010-2011 to save capital gain tax on entire Rs. 80 lakh?

(2) Can he put Rs. 50 lacs in REC bonds (u/s 54EC) in FY 2009-10 and buy a house (u/s 54F) for Rs 30 lakh next year i.e. FY 2010-11 to save capital gain tax on entire Rs. 80 lakh?

? G Ray

1. The answer to this query is in the positive. However, note that the investment in financial year 2010-11 has to be made within six months from the date of having earned the capital gains.

2. The answer to this query is also in the positive. The only difference is that u/s 54F the entire net proceeds (less expenses) have to be invested in the house and the assessee should not own more than one house at the time of sale of the shares.

However, if the house is not purchased before filing the return for 2010-11 you will have to deposit the balance amount in Capital Gains Account in nationalised bank.

Please let me know, whether any pension payment or family pension payment is taxable under Income tax.

? D.Mohan Rao

Yes, both types of pensions are taxable. However, note that —

1. Standard deduction is deleted by FA05 but family pension which attracts a deduction similar to standard deduction has not fortunately been touched. Where any family member of a deceased employee gets a pension after the demise of an employee, Sec. 57(iia) grants deduction of 331/3% with a ceiling of Rs. 15,000.

2. Members of Defence forces who have been awarded ?Paramvir Chakra?, ?Mahavir Chakra?, ?Vir Chakra? or other notified (SO 1048 dt. 24.11.00) gallantry awards have their pensions and family pensions totally exempt from income tax. Ministry of Finance order F. No 199/19/84-IT(A1), dt. 10.7.84, has approved the ?Swantantra Sainik Samman Pension Scheme, 1980? for such exemption.

3. FA04 has inserted Sec. 10(19) w.e.f. FY 04-05 that offers complete freedom from tax on the family pension received by the widow or children or nominees, where the death of a member of armed or para-military forces of the Union has occurred in the course of operational duties, in prescribed circumstances and conditions. Perhaps the widower is not included through oversight but the error is of long standing.

I have taken home loan and then after two years additional loan (mortgaged) was taken (on the same property) for furniture, renovation & extension of house. Can I avail income tax benefit for both the loans?

? Sumeet Gilra

Yes, you can take income tax benefits of both the loans but note that —

The interest payable on capital borrowed for acquiring, constructing, repairing, renewing or reconstructing the property with a ceiling of Rs. 30,000 on self-occupied property. The higher limit of Rs. 1,50,000 is applicable on loans taken on or after 1.4.99 but only for acquiring or constructing. The lower limit of Rs. 30,000 continues to be applicable for loans taken for repairing, renewing or reconstructing. Loan taken for buying furniture is not eligible since it is not a home loan.

The authors may be contacted at wonderlandconsultants@yahoo.com