Recently I read that wealth tax is applicable on cars. I already own a car the market value of which would be around Rs 8.5 lakh. I am about to buy a second car of say Rs 12 lakh. Would I be liable to wealth tax?

?Divya Khaturia

Assuming that the cars are meant for your personal use and you are not in the business of car hire, then yes, the purchase of the second car would make you liable to wealth tax. There are other assets like property, jewellery etc which are also liable to wealth tax. In the absence of details on these, we cannot comment on your total wealth tax liability. However, as wealth tax is payable on net wealth over Rs 15 lakh, assuming the cars would be the only asset in your possession liable to wealth tax, tax planning wise it would make sense to buy the second car in the name of any of your family member such that each one can take optimum benefit of the initial Rs 15 lakh basic exemption.

Recently on our anniversary, my wife and I received around Rs 40,000 by way of gifts, which we promptly banked. I wish to invest this money into my PPF account. However, one of my friends advised me that this is not allowed under law as the PPF investment should be out of income earned during the year and not from receipts such as gifts etc. Your advice on this issue would be appreciated.

?Shashi Pande

There was a time when PPF investments had to be made out of income chargeable to tax. Which meant that you had to make investments from taxable income earned during the year. However, this requirement has since been dropped and there is no bar on you investing money received as gifts in PPF.

I am a salaried person and live in a rented apartment in Mumbai. I have also bought a property in my native place at Chennai for which I have taken a home loan. I wish to know whether I would be eligible for the tax deduction on home loans in spite of the fact that I am not staying in the house purchased and in fact living in a rented flat.

?Chandan

Your not staying at Chennai or renting an apartment in Mumbai has got no bearing on the home loan deductions available to you. As long as it is residential property that you have purchased and you have taken a loan for purchasing the same, notwithstanding anything else, home loan deductions are available to you. Consequently any interest up to Rs 1.5 lakh and principal payment up to Rs one lakh are deductible.

My wife conducts tuitions at home and earns around Rs 12,000 to Rs 15,000 a month. Most of this money is received in cash. Is she liable to pay taxes? If so, since she has not put the money into the bank, would she be penalised? We use the money for our day-to-day household expenses and hence never put the money in the bank.

?Choudhary

There is no requirement as such to necessarily bank the money. However, if her net income is above Rs 1.45 lakh in the entire year, she is liable to pay taxes and file a tax return.

Now assuming that the fees are Rs 15,000 per month, the entire income for the year works out to Rs 1.80 lakh. However, she may incur some expenses in order to earn the income. Such expenses are deductible against the income and tax is payable only on the net figure. Therefore, any amount spent during the year on books, reference materials, stationery etc. can be adjusted against the income. It would be advisable to maintain informal books of accounts for a precise and correct count of income and expenses such that she doesn?t end up paying less or more than what is due from her.

Can you please guide me on the following:

My cousin, born and brought up in India has been residing at UK since last 10 years. He has money lying in his provident fund/savings bank account. He wants to get the amount converted and transferred to his account abroad. Can this be done and is there any limit on transfer? What would be the formalities?

?Shreenath

Master Circular /0402006-07 dt 1.7.06 makes it possible for an NRI or a PIO to remit as much as US$ one million per calendar year for bona fide purposes out of the sale proceeds of assets held in NRO accounts.

He should have acquired the assets in question, out of rupee resources when he was in India or by way of legacy/inheritance from a person who was a resident in India.

The following Funds/assets are eligible for remittance:

a) Sale proceeds of immovable property.

b) Assets acquired by way of inheritance/ legacy.

c) Deposit with a bank or a firm or a company.

d) Provident fund balance or superannuation benefits.

e) Amount of claim or maturity proceeds of insurance policy.

f) Sale proceeds of shares and securities.

g) Any other asset held in India, in accordance with the Fema.

The remittance can be effected only when it is sought for all bonafide purposes to the satisfaction of the AD.

An undertaking by the remitter and certificate by a chartered accountant in the format prescribed by CBDT vide their Circular 10/2002 dt 9.10.02 has to be produced. It is necessary to file Form-A2, Fema declaration, certificate from an accountant, and undertaking for payment of income tax, in the specified format. A no-objection-certificate (NOC) from the income tax department will be useful, but not necessary.

I have changed my employer midway in the financial year 2006-07 with change of state from Haryana to Punjab. I was filing my return at Yamunanagar earlier.

Now where I will have to file my return? However I have submitted the same at Barnala office of income tax department.

?S V Sharma

You can get your file transferred to your new place of work by writing to the IT department at both the places.

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