My questions are to do with capital gains. Recently, I have read that capital gains tax on sale of property can be saved by investing in NHAI bonds. First of all, what does NHAI stand for and where do you get the requisite application form for investment? Does the deposit receipt or whatever instrument they issue indicate the whole amount i.e. Rs 100 or it shows Rs 80 i.e. after the discount.

I am expecting some amount along with my other siblings from the sale of our ancestral property, which is nearly hundred years old. Will that also attract capital gains tax? Since I am a retired person, what is the way out that I can enjoy some amount and deposit the rest in NHAI? Please also note that presently I do not have any taxable income.

?ZA Qadri

Long-term capital gains tax may be saved by investing the capital gains amount in bonds under Sec 54EC of the Income Tax Act. Currently, two institutions, National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC) are empowered to issue such bonds. The application forms for these bonds would be available with banks and other financial broking houses. The deposit certificate would depict the full amount invested. However, such investment saves the investor the capital gains tax, which is 20%. The sale of your ancestral property will attract long-term capital gains tax. Such tax liability will be in proportion to each inheritor’s interest in the property. Therefore, provided your share of the capital gains is more than Rs 1.50 lakh (Rs 2.25 lakh if you are a senior citizen), then you may invest such additional amount in these bonds. Note that there is a ceiling of Rs 50 lakh per financial year for investment in these bonds.

I have taken a home loan for the purchase of my house. Currently, I have a lump amount and I was wondering whether to either prepay or increase my EMI so as to reduce the period. In case if EMI is required to be increased, then by how much ? I need your valuable suggestions please.

?Hitesh

Interest rates on home loans is a function of the outside economic environment. Your loan is for a period of 20 years. Over such a long period, it is impossible to predict what direction the rates will take. While increasing the EMI would retire the loan earlier, any increase in rates will again take you back to square one. Therefore, it is always a better idea to prepay the loan and reduce your final liability. This is just the first installment of prepayment. It could so happen that going ahead you may find that you are in a position to prepay still further. You should go ahead and do it. In short, prepaying will always be a better strategy.

My wife and I have taken a joint loan of 80 lakh. We have opened a joint loan account for this and every month, she and I contribute regularly to this account from our individual salary accounts. However, the amount of contribution from both of us is not in the same proportion. She is contributing more than I am. Can we both claim a rebate of 2.5 lakh each? Or is it dependant on the percentage of each individual’s contribution to the total EMIs paid at the end of the year? We both own the house in equal proportion.

?Karan Nijher

Since the both of you own the house in equal proportion and assuming your personal equity in the house is either nil or also in equal proportion, you should be paying equal amounts of the EMI. If your wife is contributing more than you, in effect, she is paying for the part of the house that does not belong to her. Take care of this aspect. In any case, on a loan of Rs 80 lakh, your individual interest and principal payment amounts would be much more than Rs 2.50 lakh (Rs 1.50 lakh for interest and Rs 1 lakh for principal) and hence you should be able to claim a collective deduction of Rs 5 lakh.

Can I deposit Rs 70,000 in my PPF account and another Rs 70,000 in my minor son’s PPF account? I am not using PPF for Sec 80C purpose.

?Shahade

Irrespective of whether you are taking the Sec 80C deduction on PPF or not, you cannot invest more than Rs 70,000 in the aggregate in your own and your minor son’s PPF account.

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