Income tax: Official tour expense incurred on employee not treated as perk

Published: February 24, 2015 12:04:40 AM

As a flat is a capital asset, its transfer is subject to capital gain tax in the hands of the transferor...

I plan to sell to a company a flat I built four years ago. What would be the tax implications?
—Deepak Suri
As a flat is a capital asset, its transfer is subject to capital gain tax in the hands of the transferor. Since you have held it for more than 36 months, the gain on its transfer will be treated as long-term capital gain, taxable at 20% plus applicable surcharge and education cess. Further, indexation benefit shall be available. Under Section 50C, if the sale consideration is less than the stamp duty value, the latter shall be considered as full value of consideration for calculating the capital gain. Reinvestment benefit under Section 54 can be availed. Further, there is an obligation on the buyer of immovable property to deduct tax at 1% where the total amount of consideration is R50 lakh or more. Accordingly, if the consideration is R50 lakh or more, the company shall be required to deduct tax either while making the payment or credit, whichever is earlier, at 1%.

Are maturity proceeds from a key man insurance cover, assigned to a person during the policy term, taxable? Please confirm.
—Samir Sarin
The benefit of exemption under Section 10(10D) shall not be available for a key man insurance policy that has been assigned to any person during its term with or without consideration. Such a cover shall continue to be treated as a key man insurance policy, and the maturity proceeds received by an employee would be taxable as profit in lieu of salary.

I went to Australia on an official tour for seven days and extended it as a vacation for three more days. My wife and son accompanied  me. All the expenses, including the travel fare, shall be borne by my company. How much amount will be treated as perquisite in my hand?
—Kameshwar Patil
As per It provisions, any expense incurred on the employee during an official tour is not treated as a perquisite. However, when an official tour is extended as vacation, the expenses during the vacation period (boarding, lodging and local tours) and all expenses for the entire period, including the official tour period for the members of his household who accompanied him, will be treated as a perquisite. The amount paid to the employer shall be deducted from the value of the perquisite.

I own two flats in Mumbai. I use one for residential purposes and have rented out the other. Is it necessary to incur some expenditure on repair and maintenance to claim 30% deduction while calculating income from house property?
—Amandeep Singh
Section 24(a) of the IT Act allows a standard deduction of 30% of the net annual value. This is automatic and does not depend on the amount of actual expenditure incurred. It is allowed even if no expenditure is incurred by the taxpayer. However, it is not available for self-occupied property as the annual value in such a case is nil.

What will be the tax implications if I keep my flat unoccupied and stay in a rented house?
—PS Rao
If a person owns more than one house, the annual value of one of them (his choice) can be considered nil and the annual value of the other house(s) shall be determined as prescribed to compute income from house property. However, as you own only one house, there will be no tax implications unless the property is actually rented out.

I am technical director in a private limited company. On successful completion of a project, my employer gave me a gift voucher of R50,000. Will it be taxed in my hands?
—S Chaudhury
The value of a gift, voucher or token, in lieu of which such a gift is received by the employee or a member of his household on ceremonial occasions or otherwise from the employer, is taxable as a perquisite. Where the value of such gift, voucher or token, is below R5,000 in aggregate during the previous year, it is not taxed as a perquisite. In your case, the value of the gift voucher exceeds
R5,000, so the entire amount shall be taxed as perquisite in your hands.

By Suresh Surana

The writer is founder of RSM Astute Consulting Group

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