YOUR QUERIES: INCOME TAX : Tax relief on job loss compensation if you have worked for at least 3 years

The Income Tax Act provides for taxation of income from other sources including interest income either on cash or accrual basis at the discretion of the taxpayer.

If the taxpayer opts for taxation on ‘accrual basis’, then the interest income shall be offered to tax on yearly basis.
If the taxpayer opts for taxation on ‘accrual basis’, then the interest income shall be offered to tax on yearly basis.

By Chirag Nangia
Is there tax relief on compensation received in case of business shut down/employment termination? If yes, what are the rules around it and what is the maximum limit?
—Satish Khajone

 An amount received as compensation is not exempt under the Income Tax Act. However, in case of an amount in the nature of compensation received from employer or former employer at or in connection with the termination of employment after continuous service for not less than three years and where the unexpired portion of term of employment is also not less than three years, relief in respect of tax payable is available under Section 89 of the Act read with Rule 21A.

I own one flat at Thane and jointly own three more house properties with my husband in different places in India. If I sell my Thane flat and reinvest the whole amount or LTCG amount in another house property, am I entitled to claim exemption from paying any LTCG tax?
—P Shetty

To claim LTCG  exemption under Section 54, you have to invest the capital gains on sale of house either for purchase of another residential house within one year before or two years after the date of transfer or in the construction of another residential house property within a period of three years from the date of transfer. You may also park the funds in the Capital Gain Account Scheme to claim the exemption. The section does not contain any circumscribing provi-sions in respect of number of properties held by the taxpayer. Accordingly, even though you hold three other properties, you shall be eligible to claim exemption.

How is income tax on Kisan Vikas Patra calculated and is the tax on the interest income paid at the time of maturity?
—Rajiv Kaushik

The Income Tax Act provides for taxation of income from other sources including interest income either on cash or accrual basis at the discretion of the taxpayer. If the taxpayer opts for taxation on ‘cash basis’, interest from Kisan Vikas Patra (KVP) will be taxed in the year of its maturity or premature encashment at applicable slab rates for an individual. If the taxpayer opts for taxation on ‘accrual basis’, then the interest income shall be offered to tax on yearly basis.

The writer is director, Nangia Andersen India. Send your queries to fepersonalfinance@expressindia.com

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