'Can I reduce income tax by claiming tuition fees?'

Have a query regarding tax planning or tax filing? Maybe we can help.

Drop us a line and our expert, Anil Rego of Right Horizons, will answer it.

Got a question for Anil Rego? Please write to us at getahead@rediff.co.in with the subject line as 'Tax query'.

I would be much obliged if you could advise/guide me in the following income tax problem.

My wife has disposed of a piece of land, she inherited (ancestral property) classified as agricultural land .The advance amount of about Rs 20 lakh was   deposited in a government bank in savings account under Capital Gain Scheme.

The advance was obtained Rs 5 lakh in October 2007, Rs10 lakh in January 2008, and Rs 5 lakh in April 2008 and the amounts were deposited in the Capital Gains SB Account at the time of receipt with the intention of investing the amount Purchase of a house or purchase of and construction of house to avail Income tax benefits. The amount has not been invested in landed property yet.

The property sold was registered in Oct 2008 after extending the contract 4 times. As you the full amount is not shown in the document. 

Shall I get the benefit of tax if it is for purchase of a building/ and construction of building in the name my married daughter? Is there any other alternative say purchase of a plot in my name and gift it to my daughter and she constructs a building with housing loan availed from bank?

Or can I  pay  tax  on the  amount  now  treating the income as capital gain? Should I have to provide proof to the IT authorities for treating the income as capital gain? Kindly advice if   any   further details are required to tender the advice kindly informs me.

Parameswaran S

Anil: The property needs to be in the person's name in order to be able to claim the tax benefit. 

You can always construct a house as an alternative. 

It is better to gift the money to your daughter and she purchases the house -- there would be no re-registration requirements in that case. However, you can also choose to buy property in your name and transfer the same as an inheritance.

Shall appreciate if you clarify the following point:

I am working and living in Chennai. I receive HRA @ Rs 20,000 per month while I pay house rent @ Rs 16,000 pm for the rented accommodation. Besides, I had to spend a sum of Rs 16,000 as the fees to the property consultant for fixing up the rented accommodation.  Please advise on the income tax to be paid by me on account of HRA vis-a-vis rent plus fees paid by me during the fin year 2008-09.

Jibanendra Nath Mahanty

Anil: You will have to support your HRA claim with rental receipts, I presume that the rental receipt mentions Rs 16k pm, hence, you will be able to declare this only. HRA is allowed only on rentals paid and any ancillary cost getting the benefit is clearly ruled out.

I am staying in Kolkata as a tenant. Getting IT exemption after submitting the rent receipts. I am planning to purchase a flat in Kolkata though bank loan & give the same on rent & continue to stay as a tenant. My question is: will I be able to get the IT exemption on submission of rent receipts as I am doing now or do I need to say in my own house instead of saying on rent. For how many flats one can avail the benefits of home loan. I will be thankful on a kind response.

M Rao

Anil: Since you are letting out your flat, you can continue to claim the HRA benefit. However, you will be required to show the rental income (there is a 30 per cent deduction on rental income that you can claim) and reduce the interest paid towards home loan -- the net amount should be stated as 'Income / Loss from House Property'.

2. You can have one self-occupied and any number of let out properties.

This query is regarding perquisite tax on company living accommodation. Presently, I am paying tax on company living accommodation at the rate of 7.5 per cent of my gross salary income. I am retiring in Oct 2009. I would like to know that my settlement regarding gratuity (above Rs 3.5 lakh) and leave encashment which I am entitled to get after my retirement is required to be considered for the purpose of calculation of perquisite tax. I am of the opinion that the employer and employee relationship ceases after 1st November 2009 and how far the payments of gratuity and leave encashment made after that date could be considered as income. This query is due to the fact that I am entitled to get gratuity of about Rs10 lakh and leave encashment of about Rs 6.8 lakh on which gratuity above Rs 3.50 lakh and difference of EL salary (average salary of last ten months and actually received) and the entire amount of half pay leave encashment is taxable both as income as well as for the purpose of calculating the perquisite tax which will be a huge burden to me. Shall be grateful for clarifying the matter

Srinivasa Rao

Anil: For arriving at the gross salary whilst calculating value of perquisite, rent-free unfurnished accommodation you will have to consider:

• Basic salary
• DA / Pay
• Bonus
• Commission
• Fees
• All other taxable allowances (excluding amt non-taxable)
• Any monetary payment (by whatever name called)
• For arriving at gross salary gratuity and leave encashment are not included

I am a doctor and pay Rs 4,000 per month as tuition fee. I get a stipend of rupees Rs 29,000, which includes basic of Rs 10,975, HRA Rs 5,400, DA Rs 7,700 etc. My question to you is whether tuition fees can be claimed for purpose of reducing income tax.

Lalith

Anil: No, you cannot claim if it is for self under section 80c.

The clause u/s 80C states: any sum paid as tuition fees whether at the time of admission or otherwise to any university/college in India for full time education of any two children of an individual then it can be availed for one's child and not for oneself.

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Anil Rego is the founder and CEO of Right Horizons (http://www.righthorizons.com/), an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.

I have a fixed deposit with bank for three years and I am a salaried person. How should I file my returns as regards to TDS on deposit? Should I ask the bank for a TDS certificate every financial year. Please advise

Sreekumar Pillai

Anil: The return on fixed deposits is taxable under head 'Income from other sources'. Banks would normally do the TDS on such returns at 10.3 per cent. However, this item is taxed at normal rates, hence at the time of tax filing, you will have to pay the differential taxes if any since you will also have salary income, there is a possibility that there would be a tax payable.

Please ask your bank to give you a form 16A for TDS.

I am having investments in FDs, mutual funds and shares. Last financial year (2008-09) I sold some of my debt funds and ETFs and gained some amount in that. How are these taxable: profit from selling debt mutual funds and profit from selling gold ETFs?

I would also like to know which website is the best for computing and filing my IT returns online and which package offered by them is suitable. I am looking for an easy to use and good support website.

Praveen Dang

Anil: Short term (holding period <=12 months) gains on debt: added back to income and taxed at normal rates + surcharge/ cess

Long term (holding period >12 months) gains on debt: 10 per cent without indexation benefit (adjusting for inflation) or 20 per cent with indexation benefit (lower of the two is payable) + surcharge/ cess

ETFs would fall under equities and the tax implication is as mentioned below:

Short term (holding period <=12 months) gains on equity: 15 per cent + surcharge/ cess

Long term (holding period >12 months) gains on equity: exempt (nil taxes)

Most website offer IT returns filing services which are standardized. The simplicity/user friendliness is to a large extent linked to the ability of being well versed with tax rules / regulations. Many portals offer ample support / help to ensure that the user is able to have a hassle free tax filing process. We will also be able to provide tax-filing services.

My query is regarding HUF. Can HUF make contribution in the PPF account of one of its member, under 80c? My wife and I have PPF accounts, I also have a HUF in my name so can my HUF make contribution in PPF account of my daughter (minor)? I will be investing Rs 70,000 each in my PPF account and my wife's PPF account.

Anuj Shingla

Anil: A PPF account can be opened by an individual (salaried or non-salaried) on his own behalf or on behalf of a minor of whom he is the guardian or on behalf of a Hindu Undivided Family (HUF) of which he is a member or on behalf of an association of persons or a body of individuals. An individual can open only one account for himself.

Any amount deposited to the extent of Rs 70k can be claimed as deduction u/s 80C. Hence, the PPF account opened by you should be on behalf of a HUF.

I recently got laid off from an IT company, now I am looking for job opportunities since Jan 2009, so far no luck. I was earning around Rs 11 lakh per annum. Would like to know whether I can withdraw my PF amount at this stage. I am 47 years old. I have PF amount that was from a deposit of over 13 years earning. Would like to know how I should invest this PF amount for better tomorrow? My job hunt is on, expecting a job soon, it all depends how soon market will improve. Let me know if you need additional info in this regard. 

Raghu Kulkarni

Anil: It is really unfortunate that you have lost your job.

The withdrawal before retirement clause of EPFO states that a member can withdraw up to 90 per cent of the amount of provident fund at credit after attaining the age of 54 years or within one year before actual retirement on superannuation whichever is later. Claim application in Form 19 may be submitted to the concerned Provident Fund Office.  If you are not employed for 6 months then you can withdraw the PF else you can transfer the same to your new employer.

My mother received a lot of money from my father, after his unexpected demise (including insurance money). We invested it in various instruments. My question is does she need to pay an income tax for it or for the income from the interest of the sum? Would she be required to pay wealth tax? My father had already paid the tax for the sum which he received post voluntary retirement.

Swati

Anil: Yes, she needs to pay tax on interest earned from that money.

However, depends on the instruments from which one has received such money. For example, insurance maturity amount is non-taxable at the recipient's hand. If she is a pension recipient then post accumulation of all income sources, one has to evaluate the taxability: to the extent of Rs 2.25 lakh (if she is a senior citizen) or Rs 1.8 lakh (female assessee) would be exempt from taxes.

I took a home loan for buying flat that is still under construction. EMI payments started after the issue of first installment since Jan '09. How can I claim tax benefit on the EMIs that I pay? This is my first home loan.

Chandra Vutukuru

Anil: Home loan benefits start only post-occupation of home. We presume that this is likely to be self-occupied.

The EMI has two components: interest and principal. Interest part can be claimed as loss from house property u/s 24 up to a maximum of Rs 1.5 lakh pa and principal part can be claimed as deduction u/s 80C subject to a maximum limit of Rs 1 lakh (alongside other investment avenues). Any pre-EMI interest paid (that is, interest component on EMI paid before the financial year of occupation of the house) can be claimed in five equal installments from the year in which one occupies the house.

I am a working professional, 28. I am getting my salary as professional charges each month for the last several years (I bill to the company each month). I am filling my tax return as business income. I get Form 16 A from my employer. The TDS is deducted as per the rules.

Problem statement: In the FY 2008-09, my gross receipts were slightly above Rs 10,00,000. In FY 2009-10 I expect to gross close to Rs 18,00,000. The company doesn't wish to pay extra service tax. The same is part of my gross income. Please let me know:
1. The tax amount I would need to pay at the end of FY 2009-10
2. Do I need to apply for service tax number or I can do without it? What's the rule and what's the way out?
3. What kind of tax saving I can do and how?

Rahul Jain

Anil: Since your income would come under the head business or profession, you can show all related business expenses like telephone bills, travel, business meeting etc. You can also claim depreciation on the business assets purchased. This will help you save tax. Apart from this, you can also save tax by using tax saving investments under section 80C and also get benefit of home loan interest. Your income would be crossing the limit that requires you do a tax audit and your accounts would need to be certified by an auditor. You would need to check with an auditor if your income is service taxable and accordingly pay service tax if so required by the law. For this you would need to register with the service tax department.

I have changed my job on 7th May 2009. I have not served the complete notice period with my previous employer so I had to pay them for the period not served Rs 29,000. The new employer is reimbursing the same to me. The previous employer has not reduced the notice period pay from my net taxable income and new employer has added the same to my net taxable income.

Is there some way to avoid this double taxation according to the tax laws?

Atul Agrawal

Anil: There is no tax benefit that you will get on the notice pay made by you. Being a salaried person you will not get the benefit of expenses and hence you would end up with a double taxation situation.

My salary structure is as follows:
Basic: Rs 14,875
DA: Rs 2,231
Hill area allowance: Rs 240
12 per cent contribution goes to EPF. Please guide me about my tax liability. Should I make investments at a particular time or can I invest in various tax saving tools at any time in the financial year.

Shivkanth Gupta

Anil: Your net CTC is around Rs 2.3 lakh, of which contribution towards EPF can be claimed as deduction u/s 80C. The net amount post this would be Rs 2.08 lakh. In addition, you can claim your Hill area allowance, which will further reduce your net income to Rs 2.05 lakh. We suggest you to avail deductions u/s 80C, which will reduce your tax liability to nil. If your net taxable income is less than Rs 1.5 lakh, it does not attract any taxes.

I have a home loan with ICICI bank from past three years. I am a salaried employee and I do take IT exemption for Rs 1,50,000 on this home loan. The interest component I paid for 2008-2009 is Rs 2,65,097. I let out the property for which I am getting Rs 17,000 rent per month. The party I let out to rent cuts TDS and pays me Rs 14,373 pm. My query is that whether I can claim the TDS, which is Rs 31,524 for the assessment year while filing for the tax returns.

Vemusrinivasa Anilkumar

Anil: Yes you can claim the TDS on your rental income whilst filing your taxes as long as you are issued a document to that effect (Form 16A). You can include that as one of the taxes deducted at source while filing your returns.

I have received a total sum of Rs 1,95,000 during September 2008 to March 2009 through direct cash deposits every month to my bank account by my employer in Hyderabad. (I file return in pune). No TDS deducted and no certificate given. I have PPF deposit of Rs 70,000 during the year. Assuming no other income during whole year please guide?

Rapchick

Anil: Your net taxable income would be Rs 1.25 lakh (Rs 1.95lakh minus Rs 70k). You are well below the minimum taxable limit of Rs 1.5 lakh.

(i) Is the interest from PPF has to be included in income. If yes, under which head and is it taxable?
(ii) Is the amount, which is received after every 5 years from money back insurance policy has to be included in income? If yes, under which head and is it taxable?
(iii) In Form 16 is it mandatory to mention the interest, capital gains/loss and amount received from insurance policy.

Bhuvan Ahuja

Anil: i) Interest from PPF is not taxable
ii) Any payout from insurance is also exempt from taxes. You can show it as exempt income in your returns.
iii) Yes, you need to declare all the sources of income while filing your returns, including the amounts that are exempt from tax.

I have some doubt about taxpaying. Last year, I have joined a new start up company, they have not held any money for TDS from my salary. By the end of March, I asked about the manager about this, they said, I need to pay my tax at my own. Is it correct? Next doubt is, I just want to know how I could pay my tax. What are the steps to needed pay my tax? I don't have any internet banking account. What is the criterion for the interest? In my previous firm, they are holding the TDS and paying the tax.

Joban John

Anil: If your company has not done TDS, then you are obligated to pay it on your own.

You need to arrive at your net taxable income (after clubbing all sources of income. If you have worked in multiple places then include all Form 16s), apply the tax rates and arrive at the net taxes to be paid (including cess and surcharge). Since you have missed paying your taxes prior to 31 March 2009, you are liable to pay 1 per cent interest pm for the months lapsed. Also, you were required to pay advance tax (quarterly payment of taxes based on self assessment). This calls for additional 1 per cent pm of penal interest.

You can download Challan 280 and pay self-assessment tax at any of the nationalised banks and get the counterfoil stamped. You can attach a copy of this while filing your tax returns.

I still haven't got the refund for the financial year ended on March 2008. I have got an email from the tax authority and they have attached the form 26A which I do not have any idea about it. I had filed my tax return through one of the online tax filing website.

Himanshu Ranjan

Anil: You can check up with the respective IT officer regarding the refund due. Form 26A refers to Annual return of deduction of tax from interest other than 'Interest on securities' under section 206 of the Income-tax Act, 1961.

The document that we receive after filing our tax returns states that I am supposed to receive a refund of Rs 7,000 for the financial year 2007-2008. Please let me know the procedure to claim it or am I supposed to wait for some time? If yes, then how long?

Sumeet

Anil: You need to do nothing other than filing your tax return. If a refund is due, when you return is processed, you will be refunded this amount.

I've a query regarding tax that I'm a NRI staying in London and I do share trading sometimes. Could you please tell me that is there any maximum limit above which I can't invest any further? Also, is there any maximum limit for number of shares above which I can't buy?

Deepak Maingi

Anil: There is no limit on amount you can invest, but there are limits of non-resident investments into companies. The same is available on the RBI sites.

Can you please explain me the guidelines for claiming leave travel allowance (LTA) as to the number of compulsory privilege leave to be taken, can the PL be adjusted with public holidays, other important guidelines for claiming the same.

Arvind Jaiswal

Anil: You have to avail a minimum of two days leave from your company (this however, may vary based on company policy); national and public holidays will not be considered.

The other nuances of LTA claim are:

• You can claim 2 trips in a block of four years
• For LTA purposes one uses the calendar year ending December 31.
• The shortest distance to the destination will be considered for deduction. 
• Fare cannot exceed rail AC, First class / air economy.

I have bought two apartments in Bangalore and have taken home loan for both of them. I was staying in one of them till recently. Now the apartment is vacant and no one is staying there since I have moved to Delhi and rented an apartment here. The other apartment was let out till last three weeks and the tenant has moved out recently. The EMI for the self-occupied apartment is approximately Rs 21,000 per month, and the EMI on 2nd apartment is Rs 15,500 per month. 

I have moved to Delhi on account of accepting a position in Delhi and the apartment rented in Delhi is on company lease. The rental / lease amount is Rs 20,000 per month. My questions are:

1. Is there a tax liability (perquisite value) when I take a company leased accommodation on monthly rental? 
2. The two apartments in Bangalore are not let out. Can I claim the deduction available for home loan although the apartments would not be self occupied. I recently heard that I could declare a notional rent on my apartments and claim deduction on both. Either way, please clarify on the law.
3. What is the best way to operate and minimise my tax outgo? I was planning to sell one of the apartments in Bangalore but the prices of property have reduced drastically in Bangalore and it is unviable to sell in current market conditions.

Vipin Sawhney

Anil: Company leased accommodation is a taxable perquisite and hence, there is tax incidence. Perquisite value is 20 per cent of rent paid. You are renting an apartment in Delhi and you have 2 properties in Bangalore. You can claim one of the property as self occupied and the other deemed to be let out. You can claim both for tax benefit purposes. However, for one of the properties that is deemed to be let out you need to consider rental income as would have been the case in case the property was let out.

You can switch over to HRA instead of company-leased accommodation. In that case, there would be no perquisite value. If the gains made out of sale of residential property are long term (holding period >36 months), then the same may be re-invested in another residential property to gain exemption u/s54. As pointed out by you, realty has slumped and you could wait out to sell the property at an appropriate time.

I had recently changed my job and my previous employer has deducted TDS from my salary but not deposited with the Tax authorities. What should I do? Would I be at fault if they don't deposit it? I have all the salary slips with me as proof that says they have deducted the amount each month.

Kalpesh Shah

Anil: It is the obligation of the employer to deposit the TDS made prior to certain date. You could produce your pay slips as proofs and put in a covering letter while filing your returns. You could also officially send a legal notice to the company asking them to provide you with a Form 16 since they have deducted tax at source and attach copies of the pay slips. It is likely that the company will then comply.

In which year was the limit of Rs 40 lakh imposed/ introduced as tax audit limit U/s 44 AB of the Income-tax Act?

Indoori Jagdish

Anil: Section 44AB, as inserted by the Finance Act, 1984, casts an obligation on every person carrying on business to get his accounts audited, if her/ his total sales, turnover or gross receipts, as the case may be, exceed Rs 40 lakh in any previous year relevant to the assessment year commencing on 1-4-1985 or any subsequent assessment year.

Am an NRI holding Indian passport based in UK. Plan to take British Citizenship and settle in India for few years with an OCI. Few queries:

1) Do foreign citizens with OCI get tax rebate on Indian income if they have home loans, LIC, PPF etc?
2) If not, how can OCI holders save tax while earning in India.

Rajesh Nair

Anil: For the income arising in India, you are allowed to claim the tax benefit. You can make tax saving investments inline with your taxable income to avail tax benefit.

I am a merchant navy officer by profession and have been filing IT returns for the past few years. I earn my income in US dollars. During the past few years, I have been able to sail for more than 182 days in a financial year outside Indian waters and attain NRI status on a few occasions. Thus last year (financial year 2007-2008) I spent more than 182 days in foreign waters. However, I didn't file IT returns for that year (assessment year 2008-2009) assuming that I needn't do so.
However, in the financial year 2008-09, I couldn't complete the requisite days outside Indian waters. Hence, I have to file IT returns and pay tax.
Could you advice me whether I require to file the returns for 2007-2008 (financial year) while filing the IT returns for 2008-2009?

Cibi Francis

Anil: You should have ideally filed it prior to March 31, 2009 at least. However, you can without losing additional time file your 2007-08 taxes. 2008-09 can be filed prior to July 31, 2009.

I have got around Rs 2,500 as tax refund for the current assessment year. Could you please let me know the procedure to claim the same?

Tabarez Thotad

Anil: You can file your return and the IT dept. would refund your amount as direct credit into your account.

I am a salaried employee at one educational institution. Due to some mistake by our accountant my excess TDS was deducted and now in Form 16 he has shown 'refund amount' also. I need to ask you last date of filing return for a salaried person 'claiming for refund' and do I need to fill any other form except ITR-1?

Amit Rastogi

Anil: Last date of filing taxes for year 2008-09 is July 31, 2009 for all salaried and non-tax audit cases.

You can file your taxes alongside the ITR provide your original Form 16 and the IT dept. would refund your amount as direct credit into your account.