Haven't got your PAN? Here's what to do

ave a tax-related query? Relax With Tax answers such questions.

We keep hearing it is good to invest most of your savings in the PPF account. Is this really true? To what extent can we save in such an account?

- Prachi Garaye

The public provident fund is effectively lending to the Government of India. The possibility of default in repayment is highly improbable unless the government goes bankrupt. Hence, if it is safety that you seek in an investment, this definitely is a trust worthy investment. Combined with a reasonable rate of return and tax benefits, it scores high for an investor.

How much to invest? One factor that needs to be considered is your personal taxation. The maximum amount that can be invested in PPF per investor is restricted to Rs 70,000 per annum. But you can open accounts in the name of your children and spouse and make contributions past the Rs 70,000 ceiling. But the rebate will be restricted to Rs 70,000 only.

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My wife is a housewife. Should I invest in mutual funds in her name so I can pay less tax?

- Milind Khedekar

If you plan to invest in equity-oriented mutual fund units and a long-term investment (minimum holding period of 12 months), it does not make any difference if you make the investment in any name.

The reason being that the taxability on income from mutual funds would be in terms of taxation of capital gains from the sale of such investment and the dividend earned from such investment.

Income from mutual funds gets a capital gains tax when you sell the units. If you hold it for over 12 months, you are exempt from long term capital gains tax.

Currently, long term capital gains tax is exempted on equity shares and equity-oriented mutual fund units listed on recognised stock exchanges.

If the securities are sold within 12 months, it would be a short term capital transaction with taxation at regular rates. Hence, it may help if you invest in your wife's name.

Dividend income is currently not taxable.

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If I buy a house today and repay the loan in five years, buy another house and construct, can I claim the housing loan benefit again for the second time? Or is it restricted to once in a lifetime? If you avail a housing loan in the name of the husband and wife, how can you get the tax benefit if both are working or if only the husband is working?

- Mohan Kumar

You can purchase more than one house. The tax benefit (its interest) would be available to you regardless of whether you have repaid the earlier loan or not. But you need to note that owning more than one house would mean that one of the houses would be taxed as let out on rent regardless of its rental status. Hence, for one of the houses, you would need to compute the net income after setting off the interest liability (if any) and pay tax on the same.

In case of co-ownership with your wife, if the share of the co-owners is definite and ascertainable, each co-owner is entitled to the tax benefit individually. You would need to note that your wife should also contribute in the loan repayment process. If she is not employed, authentic source of the funds that she is contributing needs to be established.

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Is income tax calculated on gross income or taxable income? If I am earning Rs 5,45,000 (Rs 545,000) per annum, is Section 88 applicable for me?

- Naren

Income tax is calculated on the basis of net taxable income and not on gross total income.

Apparently, Section 88 benefit would not be available to you. To verify whether Section 88 rebate is available or not, you need to see if the gross total income (net income before Section 80 deduction) is below Rs 500,000. If yes, the rebate would be available.

• How to get a PAN

In July 2000, I had applied for a PAN card. I have not yet received it. In September 2004, I applied again for the PAN card. Nothing yet. What should I do?

- Girish Vishnu Argade

You need not apply for PAN more than once. You could know your PAN if it has been allotted by visiting the Income Tax Department web site and thereafter by going to the Know Your PAN link. If you still have a problem on hand, you could send an e-mail to pan@incometaxindia.gov.in along with your application details.