I am given to understand that capital gains earned on sale of property can be saved by investing in another property. But recently, I also read that this is applicable to residential properties only. Kindly let me know whether the same rule applies in case of individual rental property also.

?MK Sharma

If you are an individual renting a property, residential in nature, then yes the same rule applies. On the other hand, if you are referring to selling of tenancy rights, then you will have to take shelter under Sec 54F. The rules are largely the same, however, in the case of Sec 54F, the net sale proceeds have to be invested in another property whereas under Sec 54 (that was discussed in the article), only the capital gains have to be invested. Alternatively, you may invest the capital gains in NHAI or REC bonds to save tax for both cases.

I have some investments in mutual funds and I have received communications from them regarding the fact that I have to submit my PAN number. I have not applied for PAN so far as my income is below the taxable limit. Now, if I apply for PAN, I will have to file my tax return, in spite of the fact that my income is not taxable. This is indeed unfair. What is the remedy in this situation?

?Nitish

There are many persons like you who are under the impression that getting a PAN means having to compulsorily file a tax return. This is a misconception. Though a taxpayer needs to have a PAN to file the tax return, the reverse is not true. Filing a tax return is obligatory, if and only if one earns an income above the basic exemption limits. For FY 06-07, these are Rs 1 lakh, Rs 1.35 lakh and Rs 1.85 lakh for men, ladies and senior citizens respectively. So, if your income is lesser, irrespective of whether you have been allotted a PAN or not, you need not file a tax return.

Can you clarify whether in the case of mutual funds, dividend reinvestment option attracts any entry load (say 2.25%) on the dividend being reinvested? Does the policy differ from fund to fund?

?Vinay Raje

Dividend reinvestment does not attract an entry load. Only a fresh investment or a transfer (switch) attracts the entry load. This is true for all mutual funds.

In the recent Budget, the perk value on employer provided accommodation has been lowered to 15% from 20%. This has been done retrospectively – ie applicable from FY 05-06 onwards. However, my return for that year is already filed. Now, how can I get the benefit of this reduction?

?Bhambhardekar

You can do so by filing a revised return. Such a return can be filed by you till March 31, 2008. However, eligibility of the lower perk tax is not yet free from doubt. Some experts are of the view that the same is available only if there is a concession given in the matter of rent. In other words, if you have been paying a concessional rent to the employer for the accommodation, then and only then will you be eligible for the lower rate. However, if it is a rent-free accommodation, then the original rate of 20% as specified by Rule 3 continues to apply. However, some other experts feel that Rule 3 has since become redundant and it is a matter of oversight that it hasn?t yet been omitted. You should consult your tax advisor before taking any step in this regard.

I am a salaried person. My only other income is some bank interest. I was under the impression that I will need to file income tax form ITR-1.

However, since I have taken a housing loan, I am being advised by my CA to submit my return through ITR-2. I am not convinced since I don?t have any rental income or any capital gain, etc.

What should I do in this regard?

?Matta

If you have taken a housing loan, on account of the interest deduction, you will have a negative income from house property. But since house property income (albeit negative) comes in the picture, you are being correctly advised to file ITR-2 by your CA.

If you do not intend to take the housing loan deduction into account, then of course you are free to use ITR-1.

However, the loss from house property on account of the interest payment can be set-off against your salary income or the interest income, thereby lowering your tax liability. Hence, it would be very much in your interest to use ITR-2 instead of ITR-1.

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