Do you know what Section 80DDB is and how it can help you save tax? How much tax can you save under this section and how can you avail it?
Also, what should you do if your previous employer has not given your Form 16 and you want to file tax returns? Is there a way in which you check your TDS credit status online?
In a chat with readers on May 21, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax claims on home loans, HRA benefits, capital gains tax and how to plan and invest your money in 2008-09?
For those of you who missed the chat, here is the transcript.
shiv asked, Hi Mahesh, i am shiv 22 year old recently moved from college to company earning currently 22K per month and i have a plan of doing MBA after 2-3 years from now. so can you suggest me some good plans where i will get tax benefit as well as financial assistance to do MBA on my own.
Mahesh Padmanabhan answers, Tax saving investment come with varying lock-in period, with a minimum period of 3 years. In case you are planning to accumulate funds that would be used to fund your education, theoretically you should be looking at safe investment options and if such option is in tax saving investment then the shortest period option is 5 years term deposit or 3 year infrastructure bonds (if available). In case you are not averse to risk then ELSS mutual funds with 3 years lock-in is available. The investment avenues open up in case you are not looking at tax savings. Varying term deposits either in lump-sum or recurring are available that could be used to park your funds safely. Open ended diversified mutual funds or liquid funds are available for investment in case you are looking at stock market exposure.
sharads asked, Hi,my take home salary is 40 k per month.I have already invested 40 k in Mutual Funds,But due to US Slowdown and inflation nowadays market is very weak.So would you suggest me to go for Mutual funds for investing 50 k more or I should invest some where else like PPF,NSC?
Mahesh Padmanabhan answers, Risk appetite is different to each individual, people with high or medium risk appetite can invest in the equity markets either through shares or through mutual funds. In case the risk appetite is low then such individuals need to look only at safe fixed interest bearing securities such as term deposits, PPF, NSC etc. Historically it has been observed that any equity investment done with a long term perspective has better standing in terms of reasonably high returns and low risk. Hence in your case if you are looking at a long term investment horizon then mutual fund is a better option.
sharads asked, Hi,Apart from Mutual funds,where all we can invest so that we get decent and safe return after 5 Year?
Mahesh Padmanabhan answers, Term deposits with a 5 year time horizon can get you tax benefit as well as safe return.
vinod asked, Hi Mahesh, my current ctc is 6.2 per annum..kindly let me know the best way of investment, where i can get maximum tax benefit and also this year i am planning for a Housing loan of about 15 Lakhs..
Mahesh Padmanabhan answers, In your case your home loan could fetch you up to Rs. 1.5 lakhs deduction on account of interest and the principal component could be used as eligible investments under section 80C upto Rs 1 lakh. Salary structure would also determine the tax outgo. Try to fit in tax exempt income component into your salary by talking to your payroll personnel.
A1 asked, I have a basic salary 27742 HRA 5000 Conveyance 3300. I wish to purchase a house which will cost around 30L. I intend to go for life insurance kindly suggest me some policy. Also which MF's will suit me for a period of 3-5 years with an investment of 5000-1000.
Mahesh Padmanabhan answers, In case you take a housing loan, the repayments would put pressure on your finances and hence you would need to be careful with the insurance plans you chose as well as the MF investments that you make. You could go in for term insurance plans, which are cheap but at the same time offer coverage. Alternatively, you could go in for plans that are essentially term plans which return back some money after the maturity. Dreamplan from Birla Sunlife is one such plan.
sachin asked, hi my net income is 4 lacs and i have 2 house loan on my name wheather i will get benefit for both of them or not?
Mahesh Padmanabhan answers, In case you have more than one house in your name, you could treat one house (of your choice) as self occupied and other house as deemed to be let out (in case such house is not actually let out). In this scenario, you will get benefit of interest deduction upto Rs. 1.5 lakhs on the self occupied house and the total amount of interest on the deemed to be let out property.
saurabh asked, Hi Mahesh, My net taxable income after all investment is about 4 lacs. I had a doubt referring to the article 'Your parents and in-laws can save you tax'. As my father's net taxable income is NIL, can I gift some money to my father? so that this can save some tax for me, as mine and my father's income tax slabs are different. Also if this is possible then how will I claim tax rebate on this gifted money?
Mahesh Padmanabhan answers, You can gift money to your father without attracting Gift Tax and the income generated from such gifted amount would not be clubbed in your income provided that the gift is irrevocable. You would not get any rebate on such gifted amount.
Balaji asked, Hi Mahesh Should we average the buying price for calculating SHort Term capital gains in trading or do we need to consider FIFO basis for calculating gains
Mahesh Padmanabhan answers, FIFO basis can be used determine the buying price.
shek asked, Hi Mahesh, I am spending around Rs.2000 per month on my mothers medication(cancer). Can I claim this amount for income tax exemption. I am a salaried class employee. Please answer.
Mahesh Padmanabhan answers, You could get deduction under section 80DDB for such medical expenditure. However, you would need to get a certificate from an oncologist working in a government hospital. The limit of such deduction however is Rs. 40000.
rajiv asked, Hi Mahesh. I am an NRI and wud like to file returns on my equity investments. Can u please throw light on how do i go about?
Mahesh Padmanabhan answers, You could use the services of a tax practitioner to assess the capital gains arising on your equity investments and get the returns processed and filed by him. ITR - 2 would be the right form to be used for filing your returns.
manju asked, Hi Mahesh, My Mother is under medical treatment for kidney failure. I have an insurance (mediclaim) for my mother as well, most of the expenses are covered by mediclaim. Can I claim the amount under sec 10DDD. If yes, do i need to submit medical bills and what is maximum amount i can claim.
Mahesh Padmanabhan answers, You could avail of section 80DDB deduction for the medical expenses for renal failure. However, you would need to get a certificate from a Urologist working with a government hospital. Also, such deduction for expenses would be reduced by the amount of insurance claim received by you.
sampath asked, I am paying a Monthly amount for my father for his personal expences..is there any provision to claim the amount spend...?
Mahesh Padmanabhan answers, No there is no deduction available for such payments
pari asked, Hello Sir, I am earning 14000/ Per Month, I am looking for short Term Investment where i get good returns. In which area i should invest. Can you plz guide me for the same
Mahesh Padmanabhan answers, Short term investment and good returns point only towards risky investment options. Stock / shares are such investment options. In case you need to preserve the principal from any adverse fluctuation, you would need to park the funds in secure term deposits with banks or other institutions that could probably generate about 9% returns. Fixed Maturity Plans (FMP) are other option available as also liquid money market funds.
Chidambaram asked, how can we have a seperate file for HUF? Can I apply it online if I am overseas? Also can the return of income filed online these days? What do we need to post to the local ITO in that case?
Mahesh Padmanabhan answers, Yes you can have separate file for HUF. A new PAN has to be obtained for the HUF and income accruing to this HUF has to be declared separately. Electronic filing of income tax returns is possible these days using private service providers or the government tax website. In case you file your returns electronically using a digital signature, you would not be required to file any paper document separately with the IT department. However, if you file the returns without a digital signature, then you would need to physically send the signed ITR-V form generated after completing the e-file process.
babu asked, HI, I have a home loan recently but the home is under construction, it may complete in another 5 months...and i am staying in rented house..now can i eligle for both HRA & house loan ..please advice.
Mahesh Padmanabhan answers, Once the house is completed, you would be eligible for the interest and pricipal deductions. The HRA benefit can be taken till such time the construction of your house is completed. In case the new house is not in the place of your employment then you could continue to avail of both deductions ie. for HRA & home loan.
vasantacharya asked, Is it compulsory to collect the PAN NO. of the house owner, while we are collecting the rental receipts from him
Mahesh Padmanabhan answers, In case of individuals as there is no tax that is recovered from the rental payments, theoretically you are not required to obtain the PAN of the landlord.
kkiran asked, Is there anybody that received income tax refund in past 2 years? How can we track it? It's our hard earned money. Why ITD is playing with it?
Mahesh Padmanabhan answers, Thats a good line to end your question. It is pretty unfortunate that the government is not quick in refunding the excess tax paid by honest tax citizens. Also, interest is generally not paid on small refunds which are not in excess of 10% of assessed tax. Thus resulting in a situation of government running on free money. You could make use of the TIN site to check if your refund has not been delivered due to any change of residence or something like that or make a written application to your ward officer to get the refund released.
krupa asked, Hi Sir, I am going to join another company in next month. If my earlier company does not provide the form-16, how can I fill the return form
Mahesh Padmanabhan answers, Form 16 is the tax deduction certificate ascertaining the tax that has been deducted and paid from your salary. In case your employer is not issuing a certificate, you could reister yourself on the www.tin-nsdl.com site and get the TDS credit status from that site. These days i-tax returns are annexureless returns and hence you don't need to submit any documents along with the return. You can use this online statement to file your returns.
VijayRathore asked, Which combination will be better in terms of Return and Risk Coverage, for a 20 Yrs of duration: 1. Term Insurance + ELSS 2. Endowment Policy+ELSS
Mahesh Padmanabhan answers, Endowment plans are a bit expensive and money is utilised for both insurance cover as well as investment. However, a more reasonable way of investment would be to invest in Term insurance (or term plans that return money such a dreamplan from birla sunlife) and ELSS.
nbinhani asked, Hi Mahesh, Please let me know which 2 individuals can go for joint home loan. Can I along with my brother-in-law go for a single joint home? In such case, does loan benefits apply to both of us?
Mahesh Padmanabhan answers, Co-owners can be anyone and there is no relationship that has been prescribed to be co-owners. Both can claim tax benefits individually provided both are co-applicants and co-owners and both have made arrangements to contribute towards repayment of the loan.
akh asked, my mother gives tuitions at home and her income is less than 180000.since its a small coching centre there are no bills etc.so no proof of income. so we have never filed her return. now in one of her fixed deposits tds has been deudcted.if i file her return how do i show her income in the ITR form, since there is no proof of income.
Mahesh Padmanabhan answers, You can prepare the profit & loss account based on the collections made by your mother after considering her operation expenses. You would need to use ITR-4 for filing her returns which would include income from the business and interest. You could claim the refund for the TDS in case there is no actual tax liability.
srinivasaraom asked, Hello Sir I am 43. my financial planner advised me to go ULIP's to cover insurance and investment. my present risk cover is around 10 lakhs. what would you advise. if yes, which ulip is most recommended.
Mahesh Padmanabhan answers, In case you trust your financial planner, then he might have got your case analysed and covered and accordingly might have recommended ULIP. Personally, you would need to see if you want to keep insurance and fund investing separate. If yes then you would be better off taking insurance (either in the form of term insurance or ULIP+term insurance) that are cheap and invest in certain actively managed mutual fund.
dipdip asked, hi mahesh, i had purchased a house last year and also availed the benfit of tax on it. now i plan to sell it what are the tax implication.
Mahesh Padmanabhan answers, In your case as the period of holding has not exceeded 36 months, any gain resulting from such sale would be treated as short term gains and accordingly would be taxed at your slab rate. Moreover, if you have claimed principal deduction under section 80C, then in case you sell the house within 5 years, the deduction claimed would also be added to your total income.
Mahesh Padmanabhan says, We thank you for your active participation in this chat, we would now be closing the session for the day and meet you again in the next session. Team RelaxwithTax
Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.