Tax rebate is available for purchasing or constructing a home

My HUF income/loss is as follows:

1. Income from short-term capital gains: Rs 2,38,000

2. Speculative loss from Future trading contracts: Rs 26,000

Can these two be set off against each other?

?Kansal

Income from futures and options is not treated as speculative any longer. Therefore, you may set off the loss from F&O against your normal income, including short-term capital gains. However, if the short-term capital gains arise from the sale of shares on a recognised stock exchange in India or from redemption of the equity-based scheme of any MF, it has to be taken as a separate block and charged to tax at the rate of 10%. The benefit of the initial threshold is available for short-term gains.

I have one housing loan on my name. I wanted to buy a separate flat or house for my parents as our present flat area is very small. But as I will pay the EMI?s, I will be the owner of the flat. I will not receive any income from my both flats.

Will I be eligible for tax benefits from both the housing loans?

?Vimal Shah

Yes, you will be eligible for tax benefits on both the loans, within the overall limits applicable. This 2nd house will be deemed to be let out and notional rent will be added to your income. There is no limit on the interest deduction in respect of a let-out property.

I planted a poplar (tree) plant in my agricultural land. After six years, I sold the wood from the plants for Rs 3.45 lakh in September 2007.

Please let me know whether the said income from the agricultural land is taxable or not.

?Aman Bhangu

Agriculture does not merely mean raising of food and grains for consumption of human beings and animals. It involves operations on land for production of utility for consumption or trade or commercial use. Raising a tree and selling the wood is clearly an agricultural activity and therefore, the income of Rs 3.45 lakh (less expenses) you have earned is tax-free from income tax. However, note that it is to be included in your income for rate purpose. For clarity, let us assume your other income is Rs 2 lakh. We will be using the tax rates applicable to next year.

Normal Taxable Income 2,00,000

Add: Agri income 3,45,000

Total 5,45,000

Tax Thereon 68,500

Agri. Income 3,45,000

Add: Basic Exemption 1,50,000

4,95,000

Less Tax Thereon 54,000

Tax payable 14,500

Education Cess 435

Total tax payable 14,935

If there were no agricultural income, the tax would have been Rs 5,150. In other words, the agricultural income is not really tax-free. Besides, many states levy tax on agricultural income.

One property exists in the name of my father having a single-story construction. I want to avail of a housing loan on this property to construct the first floor on this property. Will I get a tax rebate on this?

? Narhari

The rebate is available for purchasing or constructing a residential house and a house consists of land and the superstructure. In your case, since the land belongs to your father, you will not be eligible for the rebate.

I am a NRI and PIO. In December ?05, I purchased two residential properties and a commercial one. I paid through my NRE account. What is the tax implication when I sell these properties and how can I bring gains outside India in foreign exchange (dollars)? What is the rate at which I would be taxed on capital gains or loses, if any?

?Sudhakar Shah

?Short-term capital asset? is a financial asset held for 36 months or less immediately preceding the date of transfer. An asset, which is not ST is a long-term asset.

Long-Term Capital Gain (LTCG) is to be computed by deducting from the full value of the consideration i) any expenditure incurred in connection with the transfer ii) indexed cost of acquisition and iii) indexed cost of improvement.

LTCG is taken as a separate block and charged to tax at a flat rate of 20.6%. No deductions are allowed under Chapter-VIA like u/s 80C, 80D etc, for LTCG.

The tax on all long-term capital gains, which are chargeable to tax, can be saved by investing within 6 months the amount of capital gains in infrastructure-related bonds of NHAI or REC u/s 54 EC. The lock-in period is 3 years. The current interest rate is around 5.5% and this is fully taxable.

The indexed cost is computed by multiplying the cost of acquisition with the ratio of the Cost Inflation Index of the year of sale by that of the year of acquisition.

STCG is included in the other income of the assessee and taxed at the normal rate applicable to him.

Sec 6(5) of FEMA allows a person Resident Outside India to hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such a person when he was a Resident in India or has inherited it from a person who was a Resident in India.

As per FEMR (Acquisition and transfer of immovable property in India), repatriation of the sale proceeds of immovable property other than agricultural land, farm house, plantation property in India by a Resident Outside India who is a citizen of India or a Person of Indian Origin, is allowable, provided the property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of FEMA.

The amount allowed to be repatriated should not exceed the amount paid for acquisition of the property i) in Forex through normal banking channels or ii) out of an FCNR account or iii) the Forex equivalent, as on the date of payment, of the amount paid out of the NRE account.

The repatriation of sale proceeds is restricted to not more than two residential properties. There is no restriction on the number in the case of commercial properties.

The authors may be contacted at

wonderlandconsultants@yahoo.com