I am given to understand that I can avail benefits of both HRA deduction and interest on home loans. But when I declare the interest of my home loan, the section says that – ?Where House Property Is Self Occupied?
(IT 048). However, this is paradoxical by definition. In other words, I own a house but I do not stay in it as I live in a rented flat. So the flat that I own cannot be “Self Occupied”. Can you please help in clearing this small doubt so that I can avail the benefit of HRA and also the home loan?
?S N Shah
As per Sec. 23(2) of the Income Tax Act, the term “self occupied property” includes property that cannot be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place in a building not belonging to him.
In other words, it is not necessary that you have to be occupying or staying in the property, rather, the property should be meant for your occupation.
The accounts department of our company maintains that you can either claim HRA or home loan deductions but not both. In my case I am a salaried person. I own two houses in Mumbai and therefore I never claimed HRA. Could you specify the exact section in the Income Tax Act that allows both deductions?
? J Mantri
This is a common misperception.
The following is an extract from Circular 8 of the IT department dated 5-12-2007.
?It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in Rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the House Rent Allowance or any portion thereof from the total income of the employee.?
Nowhere does it say that the taxpayer cannot own residential premises. The only condition is that he or she should not be staying in such premises. The same can be ascertained by requiring the taxpayer to provide rent receipts or lease agreement of the leased / rented flat.
Can I re-invest a matured NSC without withdrawing the matured amount in order to save the tax on matured NSC? Also, if I buy NSC for a minor (not for 80C purpose), does the maturity amount become taxable?
?Lokhande
The proceeds of a matured NSC can be used to reinvest in fresh NSC for Sec. 80C benefit. The maturity amount of NSC is not taxable fully; it is only the interest for the last year that is taxable. That is assuming you have claimed Sec. 80C deduction for the first five years’ interest. Else all six years’ interest will be taxable. The same principle will apply in the case of investment for minor.
I want to know that how to incorporate the retirement benefits in the first income tax return after retirement. According to DCRG, commutation of pension, encashment of leave, GPG.& group insurance. There is no column in the income tax return form no.2. Can I enclose photocopies which are in Punjabi language or should I just give a note in the return about the retirement benefits.
?Balwinder Singh
The benefits received on retirement are eligible to tax under the head ?Salaries?. No annexure is required to be attached with the returns. The department will pick up the data related to you from the TDS returns filed by your ex-employer.
It is reported that some of the offices of the department insist on attachment of your original TDS certificates with your returns since the data they have is not reliable! You may have to abide by their wish.
I have a query about tax rate for short term capital gains and tax rate for total income. Say, I have a long term capital gains of Rs. 60,000 and short term capital gains of Rs. 3,00,000. I have no other income. Now what should be income tax I should pay? Should it be 10% of Rs. 3,00,000 i.e. Rs.30,000? Or should I use the slab rates as applicable to me? Please clarify how income tax should be calculated for this case.
? J. Prabhu
The LTCG of Rs. 60,000 is tax-free. As regards short-term gains,
For a Resident individual or an
HUF, where the total income as reduced by Short-Term or Long-Term Capital Gains on which tax is exigible falls below the tax threshold of Rs. 1,10,000 the gains would be reduced by the amount by which the total income so reduced falls short of Rs. 1,10,000 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. In your case, since you have no other income, you will have be liable to pay tax @ 10% on Rs. 1,90,000 (= Rs. 3,00,000-Rs. 1,10,000).
Please note that the 10% rate and Rs. 1.10 lakh limit is applicable only for FY 07-08. From FY 08-09, the rate of tax on short-term capital gains is 15% and the basic exemption limit is Rs. 1.50 lakh.
The authors may be contacted at wonderlandconsultants@yahoo.com
