Tax Exemption Only For STs Living In NE States

Updated: Jan 12 2003, 05:30am hrs
This year, the companies have deducted tax on dividends. I am an NRI and I would be grateful if you could advise me if there is any way to reclaim the same by submitting tax exemption forms.
PA Subramaniam,

If the ITO is satisfied that the total income of any assessee justifies the TDS at any lower rate or not deduct any tax, he shall, give to the assessee a certificate. On the basis of this certificate, the assessee can ask the income distributing officer to take the appropriate action.

The assessee has to make application in different prescribed forms for different purposes. The following list gives the purposes:

Form-13: Salary, Interest, Commission, Brokerage, Dividends, Rent, Income from units, Compensation by way of compulsory acquisition.

Form-13C: Payments made to contractors and sub-contractors.

Form-13D: Dealings in lottery tickets

Form-13E: Fees for professional or technical services.

The ITO will issue certificate Form-15 for TDS on dividend and Form-15AA for other income.

I very much doubt whether you will succeed in your venture of convincing the ITO that the taxable income earned by you will be below the tax threshold. You will do well by filing returns and demand for refund of TDS.

As per Sec 10(26) in the case of members of schedule tribe, residing in area of North Eastern states, any income which accrues or arises a) from any source in the areas or states aforesaid b) by way dividend or interest on securities from all over India does not form part of total income.

The person should satisfy the test of residence in the specified areas for the benefit of the exemption. I find that when employees of large organisations, particularly those of LIC and SBI are transferred, say to Mumbai, tax from salary is deducted at source as the income accrues or arises out of area.

While they were employed within the NE states their total income was below taxable limit or nil. They did not require PAN unless fall within the 1-by-6 category.

In my opinion, they cannot claim refund of TDS as member of the scheduled tribe as they are not residing in those areas.
VU Kamat,

Yes, you are absolutely right. For availing this exemption the person must satisfy both of the following two conditions:

1. He must be a member of schedule tribe as defined by Article 366(25) of the Constitution of India and,

2. He should be residing any area in the states of Nagaland, Manipur, Tripura, Arunachal Pradesh, Mizoram or districts of North Cachar Hills, Mikir Hills, Khasi Hills, Jaintia Hills and Garo Hills or in the Ladakh region of the state of Jammu and Kashmir. When he starts residing at some other place for any reason, including transfer of employment, he loses the exemption.

My brother is seeking loan from me to buy a house for himself. According to you, "The loan has to be utilised for meeting the borrowers personal requirement or for his business purposes and under no circumstances be used for relending or for investment in shares, securities or immovable property." Doesnt a house constitute an immovable property If so, has this law been amended to allow small personal loans for housing purposes
Mangesh Pujari,

The house does constitute immovable property and hence the loan given by you cannot be used by your brother for buying a house even if you are ready to sacrifice the repatriability thereof.

Yes, there are two ways out:

1. You can ask your AD (bank) to grant your brother a rupee loan against the guarantee provided by you against your deposits. The AD will naturally charge him the normal interest for housing finance. In that case, there is no foreign exchange involved unless your brother defaults, the AD will invoke the guarantee. You may discharge the liability by:

i) paying out of rupee accounts held in India or;

ii) by remitting the funds to India; or

iii) by debit to your FCNR/NRE account.

You may thereafter, enforce your claim against the brother to recover the amount. In case the liability is discharged by payment out of rupee balances the amount becomes non-repatriable and can be credited only to your NRO account.

2. The other way out is to give him a gift. When he is in a position to return the funds to you, he may give you a gift, inclusive of the interest or otherwise. The amount becomes non-repatriable.

I am a bank employee and had availed a housing loan of Rs 1.50 lakh in 1993. My monthly deduction was Rs 840 from the salary and accordingly I was claiming Rs 10,000 towards relief from income tax. In this month I have disposed the flat and liquidated the housing loan of the bank by paying Rs 60,000 towards principal and Rs 67,000 towards interest. I want to know if I can claim the full amount of interest of Rs 67,000 for my income tax purpose. I would like your advise so that income tax calculation could be done accordingly.
Chandrika U Venugopal,

The deduction is allowed for interest payable against income from house property. The principal amount repaid upto Rs 20,000 per financial year is entitled to rebate u/s 88. You should have given the bifurcation of the EMI of Rs 840 into the principal and interest component. Your loan was availed of in 1993.

The interest you can claim as deduction is limited to Rs 30,000 per FY. Since you owned the property for part of the year, you may claim the deduction of interest as well as rebate on Rs 20,000 of principal repaid u/s 88. I sincerely feel that you should not have settled the loan prematurely. The tax benefits are quite high, so high that you should take a loan even if you have enough funds to be able to buy the property without the loan.

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