How to avail of HRA and home loan benefits

HRA is not part of your salary but you still want to claim tax deduction on rent paid? can you do it? If yes, then how and under which section can you avail of HRA benefits?

Can you claim HRA benefits if you are staying with your parents and actually paying them rent every month? Can you claim HRA as well as home loan interest deduction if you have taken a home loan but are staying at some other place and paying rent for it?

What is the maximum tax deduction you can avail on your home loan's principal and interest repayment? On the capital gains side, will you have to pay capital gains tax on ESOPs sold in a foreign country and money transferred to India?

Do you know how to pay tax on capital gains and what is the last date for doing so? How will you be taxed on profits made by you in intraday trading?

In a chat with readers on February 13, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax claims on HRA, home loans, ESOPs and capital gains tax?

For those of you who missed the chat, here is the transcript.

Siddarth asked, Dear Sir, I am getting 2.85 P.a, I have a LIC policy where i pay Rs.6000/- as premium quarterly, how much more i should invest and where?

Mahesh Padmanabhan answers, In case you have no other investments apart from the LIC premium paid, then you would need to invest further Rs 76000 towards tax saving investments such as PPF, ELSS MF, etc. Additionally, you could take mediclaim insurance with a premium of upto Rs 15000 or Rs 20000 in case any of the dependent individual is above the age of 65.

shweta asked, i'l b completing 2 yrs in sip this march, (4000 pm in 4 diff sips namely SBI magnum sector umbrella, SBI magnum blue chip, Reliance equity opp, Birla top 100) when do u think i shud withdraw the amt so that i can get max returns since budget is round the corner?

Mahesh Padmanabhan answers, Our recommendation is that you should be invested in the market for a long term period. Hence our suggestion is that longer you stick around in the market and keep investing in a disciplined way, your risk of loss from stock market would be almost minimised.

vikas asked, Can investment in post office RD be treated as tax saving investment......kindly confirm?

Mahesh Padmanabhan answers, No this investment is not covered under the section 80C deduction.

GR asked, If A pays lic premium amt thru his bank account for a policy which is in name of B, then who can claim income tax benefit for the premium paid? A or B?

Mahesh Padmanabhan answers, The relationship of A & B is relevant as an individual is not eligible to claim the tax break on insurance premium paid on behalf of the parents. In normal case either of the guys could take the benefit of such premium. In case the premium is paid on behalf of B then B should repay the said amount to A later.

sannigrahi asked, My tax consultants have just closed their firm in Dibrugarh, Assam. What should I do to get my file transfered to my present location at PUNE?

Mahesh Padmanabhan answers, You would need to make an application for change in PAN data and submit the same with either NSDL or UTI. In case you are an employee, you could thereafter start filing your returns in Pune. In case you are self-employed, it would be advisable to send a letter to your ward officer in Assam and also a copy of the same to your Pune ward officer requesting for the file to be transferred to Pune.

deepak asked, how many yrs a person shud invest in ELSS ideally to get more returns?

Mahesh Padmanabhan answers, ELSS schemes come with a lock-in period of 3 years. The idea here is long term investing to gain in the later years from the capital appreciation of the underlying shares. Hence there is no specific time line that is mentioned for a person to exit the ELSS fund. In case you are market savvy then you could interpret the market to sell on a high and purchase at a low point. However, we do not recommend this course of action as it brings along a high degree of risk.

sk asked, Hi Mahesh, I have calculated my capital gain for this financial year but don't know how to pay it and what is last date for paying it, please help?

Mahesh Padmanabhan answers, You would need to pay the advance tax before March 15. Any advance tax paid before March 31 is also considered to be within time. You would need to fill up challan ITNS 280 and deposit the cheque with any bank accepting tax payments.

neetu asked, hi Mahesh, my hubby's co. does not provide HRA & other allowance, wat he gets is basic of 34k in hand, (till dec it was 31k in hand from jan it is 34k) n we have already done an invt of 1,10,000 for tax saving, n still the a/c's has told him to pay a tax of 43000/- we stay in a rented flat, he has been advised to give rent receipts, we pay a rent of 8k per month. how much money do u think we'l be able to claim next yr with 8k pm?

Mahesh Padmanabhan answers, Your husband could avail of the benefit under section 80GG in case your husband does not get HRA. However, the amount of deduction is restricted to the lowest of the following: Rent paid in excess of 10% of his total income or Rs. 2000 p.m or 25% of his total income

vijay_petu asked, Hi Mahesh, my parents are retired from their respective services. I stay in a room above my dad's house . Can I claim HRA for the same if I pay 6k a month to my dad? Thx.

Mahesh Padmanabhan answers, In case you stay in your father's house and pay rent to him actually then you would be eligible for deduction on account of rent paid.

shipra asked, As a lady i get a tax rebate upto 120000 so how should i save tax on remaining 72000 as my inc. is 1.92 lacs/annum?

Mahesh Padmanabhan answers, In case your taxable income is Rs. 1.92 lakhs then the tax free limit would Rs. 1.45 Lakhs. The further amount of investment required to zero-ise the tax liability would be to invest Rs 47000.

nilesh asked, I am paying pre-emi for home loan, I will be getting possession of my flat next year. Can I claim tax benefits for the amount which I have paid till date as pre-emi?

Mahesh Padmanabhan answers, Pre-emi interest has to be aggregated and claimed in five equal instalments after the completion of construction of the house property. However, such amount is within the Rs 1.5 lakh ceiling of interest deduction for self occupied house property.

nm asked, hi Is sbi magnum tax gain is good option for Investment?

Mahesh Padmanabhan answers, Yes it is a good tax fund and has declared a dividend of 110% with a record date of February 15, 2008.

deepakm asked, Dear Maheshji, my previous employer is a US based MNC, which had issued me some ESOPs. I made some dollars by selling the vested stocks and the proceeds were wired to my Indian account. My previous employer has already paid the FBT. What is the capital gains implication? I know that for stocks listed in India, tax on long term capital gains is nil. Does this apply to stocks listed on NASDAQ? Thanks for going through the post. Deepak.

Mahesh Padmanabhan answers, In your case as the company is based in US, FBT is not applicable to such company. However, conversely as the company shares are not listed here in India, even long term capital gains on sale of such shares is taxable at 20%.

Ashutosh asked, Hi, I recently took a home loan jointly with my wife for a property which is 50% in my name. Though I have already saved 1 lac and only feb and march loan installment would be calculated for this financial year even if I show the home loan in calculating tax. Pls advise is it wise to show these two installments or should I start showing from next financial year?

Mahesh Padmanabhan answers, In case of home loans, though the recovery is done as EMI, the initial EMIs carry bigger interest component and lower principal component. Hence you could benefit out of the interest paid which is outside your section 80C (Rs 1 Lakh) limit.

pankajwani asked, Dear Sir, I am a Salaried Person in Nashik. As per my companies information, tax amt I have to pay is Rs.13000. I will submit some medical bills of Rs 8000, Monthly Rent for my House of Rs 2500 *12, LTA Bill Of Rs 25000, 5000 Rs LIC Premium. Where should I invest in order to have a minimum amt of Tax,and how much?

Mahesh Padmanabhan answers, Aparently you have not made full utilisation of the section 80C limit of Rs 1 Lakh. Based on your financial ability you could invest a further sum upto Rs 95000 as you have made an investment of Rs 5000 in LIC.

deepika asked, SIR, IN CASE THE PROPERTY GIVEN FOR RENT AND SHOWING THE INTEREST INCOME IN THE TOTAL INCOME. WHAT IS THE MAXIMUM INTEREST AMOUNT CAN BE CLAIMED FOR HOUSING LOAN INTEREST?

Mahesh Padmanabhan answers, In case you have rented out your property then you would be eligible for a standard deduction of 30% of the net adjusted annual value and the entire interest paid / payable on the home loan.

shamdeshpande asked, You asked, dear sir, I have taken home loan of 1560000 for this year principal amt. is 33000 approx and 141000 interest amount. I want to ask you what i should invest in Life insurance. My yrly salary is 4,80,000 what amount do you recommend to invest in life insurance which insurance policy is good? do we trust lic only? should we trust max new york life as it is pvt company? waiting for your reply sir.

Mahesh Padmanabhan answers, You have not mentioned the current investment levels that you have achieved under section 80C. In case you have not done any investments then the maximum amount of investment eligible is Rs 1 lakh. When you are investing in insurance policies then you would need to understand if the plan being offered is based on your requirement, whether the cost is comparable with the other companies similar plans. As regards viability of private insurance companies, they are strictly regulated by IRDA guidelines and hence most companies are stable.

max asked, HI MAHESH, I AM REPAYING MY HOME LOAN AND WISH TO KNOW THAT WHAT IS THE ROLE OF PRINCIPAL AND INTEREST PAID TO THE BANK, IN GETTING TAX REBATE? THANKS.

Mahesh Padmanabhan answers, The amount paid as principal contribution to the financial institution is eligible for deduction under section 80C subject to a ceiling of Rs 1 Lakh and the interest paid/payable on such loan is separately eligible for deduction under the head income from house property. In case your house is self occupied then the ceiling limit for such interest deduction is Rs 1.5 lakhs.

SIMHA asked, HOW MUCH IS TAX PAYABLE FOR AN INTRADAY TRADER?

Mahesh Padmanabhan answers, In case of intraday trading the same would be treated as speculative transaction included under the head business income. The tax on such net gains would be at the slab rate applicable to you.

Akhilesh Kumar asked, Hi Mahesh, I took home loan in Nov '07 month and currently i am staying in rented house, Can i calim Home loan Interest and HRA both. What is the possibility to avail benifit of claiming both. whereas i have no income thru my purchased home and it is in another city.

Mahesh Padmanabhan answers, In case of a situation that requires you to stay in a rented premise due to reasons of employment, you would be eligible to avail of the benefits of both HRA deduction as well as the home loan repayment deduction.

sharmapawank.2008@rediffmail.com asked, Dear Mahesh, Hi, This is Pawan Sharma here again, wants to know from you, since i am a Salaried person, last year i have missed out on filing of my Income tax returns, although i had recd. from my Company's H.O. my copy of Form- 16, with all the taxes duly deducted from my Salary and deposited by my Company. Pls suggest, what is the way out now?

Mahesh Padmanabhan answers, In case of financial year 2006-07, you could file your returns without any penalty upto March 31, 2008. In case you fail to file within this time frame, you could still file your returns maximum upto March 31, 2009 but the same might be subjected to a penalty.

bunty asked, Will I gat rebate on personal loan taken this year in income tax?

Mahesh Padmanabhan answers, In case you use the personal loan for running your business or profession, you could claim the deduction for the interest paid. However, in case you are a salaried individual then no such deduction would be available.

Binny asked, Hi, Clubbing together I have I'm saving 100000.00 (EPF,HP Pri, LIC) and around 140000.00 towarsd my HL interest paied. This Year (2007-2008) I have invested on my dauther about 100000.00 ULIP (ING Vysya Bank). Can I claim IT rebate on this investment? Can you suggest the type of investment which I can opt to save IT? Thanks in advance.

Mahesh Padmanabhan answers, You seem to have maxed out your investment limit of Rs 1 Lakh and hence there is no avenue of tax savings here. You could also look at investing in mediclaim insurance which is outside the limits of section 80C and you could avail of a deduction of upto Rs 15000 (Rs 20000 in case of any senior citizen) of premium paid.

nee asked, Hi, i have a full time job and i earn part time too, do i need to file my returns as a salaried employee? I also had a job switch during this financial year.

Mahesh Padmanabhan answers, In your case in case the part time job fetches you a retainer fee then you would need to file a return as salary cum business return. You would need to take care of your current employer of the details of your salary income from the previous employer and your net business gains so that they recover appropriate tax at source from your salary.

Taxavoider asked, Can one pay the rent and also get the rental income from house in same city?

Mahesh Padmanabhan answers, yes you can.

Mahesh Padmanabhan says, Dear Friends, thanks for your overwhelming response to the day's chat on personal taxation and finance. We would be signing off now. Have a good day