As per my knowledge if a property has been rented for at least 300 days in the year, wealth tax is not applicable. My query is regarding a person owning two houses. One of the houses is treated as self-occupied and hence exempted from payment of income tax on notional income from the house. Though the second house is not let out, notional income thereon is worked out and income-tax at the applicable rate is paid thereon. My question is whether the market value of this property has to be included for the purpose of working out the wealth tax liability of the person.
As the second is house is treated as notionally let out under income tax, will it not be automatically exempt from wealth tax as wealth tax is not payable on houses rented for over 300 days?
?Anil Patro
Your point is extremely valid and fair, however, our laws were never known for their fairness.
As it happens, the Income Tax Act and the Wealth Tax Act are two distinct and separate laws and the treatment of a particular item in one may not necessarily be recognised and considered by the other.
Therefore, when the WTA specifies that a house let out will be considered as exempt from wealth tax, it means the term ?let out? in the conventional sense and not ?notionally let out? in terms of the treatment in the ITA.
While I know the limit under Sec 80C is Rs 1 lakh, can I invest more than this amount? What I mean is that though the tax exemption is limited to Rs 1 lakh, for my savings purposes if I wish to invest over and above Rs 1 lakh, is it possible under law?
?Mohil
Yes, it is subject to limits as per rules applicable to individual instruments. For example, PPF rules prohibit an investment of over Rs 70,000 a year by any investor. Therefore, what you propose may not be possible in the case of PPF.
However, take tax saving mutual funds. Here, there is no limit on how much you can invest – you can invest any amount you desire, however, tax concessions will be limited to Rs 1 lakh. So it depends upon instrument to instrument.
In March, 2007 I invested Rs 70,000 in PPF and Rs 30,000 in tax saving funds. However, my employer has deducted full tax on my salary without taking cognizance of the tax saving investments. The HR department tells me that they had asked for proof of investments in the first week of February but I couldn?t provide the same since I was travelling. Now, for no fault of mine, I have ended up paying higher tax. What is my recourse in such cases? Can the extra tax be adjusted this year?
?Raju Gangwani
Each company has its own policy regarding the last date till which they will accept proof of tax saving investments. Though the last date for the taxpayer is March 31, employers cannot wait till that date as payroll processing has to be finished in time.
As per law, once the tax deducted has been paid to the government, the same cannot be refunded back to you by your employer. Neither can it be adjusted in the current year. The refund had to be claimed through your tax return indicating the extra tax deducted. If you haven?t filed your tax return till date, it would be advisable to do so immediately.
My query is regarding equity oriented mutual funds and the situation when dividend is paid out and units are sold within 9 months. Please let me explain by following example:
Details of case:
(1) Name of fund: Reliance Growth Fund 1/5/2007: Purchase of equity mutual fund units @ Rs 200 each unit. 5/6/2007: Dividend paid Rs 65 each unit 1/7/2007: Units sold @ Rs 180 each.
(2) Name of fund: HDFC Equity Fund 3/5/2007: Purchase of equity mutual fund units @ Rs 300 each unit 8/8/2007: Units sold @ Rs 275 each
(3) Name of fund: Fidelity Equity Fund. 5/5/2007: Purchase of equity mutual fund units @ Rs 250 each unit 10/8/2007: Units sold @ Rs 220 each Tax treatment for above:
(A)As per my tax consultant:
STC loss on units of Reliance Growth Fund: Rs 20
STC loss on units of HDFC Fund:Rs 25
STC loss on units of Fidelity Equity: Rs 30
Total of the above: Rs 75
Add total dividend received in respect of units sold within a period of 9 months from purchase date: Rs 65. Therefore STC loss to be carried forward: Rs 10.
(B) My understanding:
The STC loss on units of Reliance Growth Fund i.e. Rs 20 each unit is to be ignored as the dividend of Rs 65 each unit was received and units sold within 9 months.
However the STC loss i.e. Rs 25 each unit on units of HDFC Equity fund and also the STCL (Rs 30) on unit of Fidelity Equity Fund i.e. total STCL of Rs 55 should be allowed and carried forward for 8 years. Please confirm if my understanding is correct?
The treatment of the loss as per your understanding is correct….the tax consultant has erred in his advice. Dividend stripping laws are applicable to the particular lot of units sold in which the dividend has been declared and not to other non related units.
The authors may be contacted at wonderlandconsultants@yahoo.com
