My wife and I have life insurance policies of Rs 25 lakh each. My wife does not have any income. Can I claim deduction u/s 80C in respect of the premium paid for her?

?Vinay

Premiums paid by an individual for life cover taken for self, spouse, and children are eligible for the deduction u/s 80C. The children may be major or minor, married or otherwise.

Incidentally, kindly realise that insurance is needed to take care of the financial stress faced by the family in the case of the death of the breadwinner. It is clear from your query that it is you who are the breadwinner and not your wife.

In which case, it would make more financial sense for you to have taken a policy of Rs 50 lakh in your name instead of distributing the cover, unless there are substantial reasons to do so.

For the FY 08-09, if my income is Rs1.20 lakh and short term gains from shares is Rs 20,000 then total Rs 1.40 lakh being below Rs 1.50 lakh I would not have any tax liability. What if income is Rs 1.20 lakh and the short-term gains is Rs 50,000. Would I have to pay 15% tax for the entire Rs 50,000 or would the 15% tax be payable only on Rs 20,000 (1.20 lakh + Rs 50,000 -Rs 1.50 lakh limit).

Further, can I save u/s 80C to bring my income level down to Rs 1.50 lakh or would I mandatorily have to pay tax for the short-term gains exceeding the maximum non-taxable income? What happens if a person is in the 20% slab and then comes down to the 10% because of Sec 80C, does he pay 10% or 20% on the taxable amount?

?Sudhir Varty

If your total income is Rs 1.70 lakh, out of which short-term gains on equity is Rs 50,000, then you are free to adjust Rs 30,000 of such capital gains against the balance threshold and pay the 15% tax only on the remaining Rs 20,000. You cannot save tax under Sec 80C on any capital gain income either short-term or taxable long-term capital gains. Your last query is not too clear. If you are in the 20% tax bracket and make Sec 80C investments such that your total income falls to the 10% tax bracket, then obviously you will have to pay 10% tax and not 20%.

1.For the purpose of capital gains, which of the three dates (date of allotment, date of registration or date of possession) would be taken as the date of purchase?

2. All tax benefits under section 54 seem to be for long term capital gains, Is there any exemption/benefit under any section for short term capital gains of a residential property?

Under section 54, we can reinvest the capital gains in another residential property one year before the date of sale. So is it possible to do that investment by taking a loan (since I don’t have the money unless I sell my old flat) in a joint property or do I need to purchase property independently? Also, can I use my sale proceeds from my old flat for any purpose, since I have already done the investment by taking a loan?

?Ravi Raj

The answers to your questions are in the positive. Yes, you can take a loan to invest in the new property and then sell the old property and use the proceeds any which way you desire. There need not be any one-to-one correspondence or direct link between the sale of a property and the funds used to buy another property to save on the capital gain.

I own a house for which my interest component on loan is about Rs 1.90 lakh p.a. I have rented out the place for Rs 12,000 p.m. I stay in another rented apartment. Under the circumstances can I claim loss from the house rented out by me as deduction against my salary income?

?Rajat Kaul

Computation of tax on house rent is a complicated matter. It is better to employ an accountant to file the tax returns if you have rental income.

Tax payable on rental income may not be the actual rent charged. It depends upon several factors like i) Municipal Ratable Valuation and the place where the property is located, such as Delhi, Chennai, Mumbai, Kolkata, etc, ii) Fair Rent assessed on the basis of rents fetched by similar properties in the neighbourhood iii) Standard Rent applicable to those cities under the Rent Control Acts of respective states, iv) Actual Rent and v) Unrealised and irrecoverable rent.

You would get first a deduction from the lease rental of municipal taxes paid and thereafter a standard deduction of 30%.

The interest payable on a housing loan is also deductible.

On commercial properties and on houses given on rent, there is no limit on the deduction for interest paid or payable on housing loans. It appears that you receive a rent of Rs 1.44 lakh a year and pay interest on housing finance of Rs 1.90 lakh. The loss incurred by you from “the income from house property” as per the law can be setoff against your incomes against any other head, except ‘capital gains’.

I recall reading in the newspapers a couple of years ago that a protocol was signed between the governments of the US and India, whereby income earned in one country was not to be taxed in the other country. I am a potential beneficiary of such an agreement (if it exists), since my pension is earned in the US but taxed in India. I would like to know that such an exemption exists in the Income Tax Rules; and if it does exist, the section/subsection providing such an exemption.

?Bhuskute

As per the provisions of Article 18 and Article 19 of Double Tax Avoidance Agreement between the US and India, pension earned from the US by a person who has subsequently relocated to India will only be taxed in India.

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