Wednesday, May 12, 2010

Rebate only if capital for house is borrowed

Rebate only if capital for house is borrowed

I own a house in Ahmedabad that I occupy. I propose to buy a house in the same city. What is the tax impact on such a purchase? What deductions are available if I make such a purchase? – Dharmesh

The purchase as such will not lead to any tax implications. Note that only one property can be treated as self-occupied and the annual value taken as NIL. In respect of the other, the property will be treated as deemed to be let out and the annual value would be taken to be the sum for which the property can be leased.

The property that is to be treated as self occupied where more than one property is self occupied would be at the option of the assessee.

Deductions are available in respect of interest on capital borrowed and principal repayment of housing loan u/s 24 and u/s 80C respectively. A deduction in respect of purchase by itself will however not be available.

I had invested Rs 25,000 in a fixed deposit for one year at 8 per cent per annum. The fixed deposit will be maturing this month and I wish to renew it along with the interest.

Do I have to pay tax in respect of the interest now, as I fall within the tax bracket, or can I offer the entire interest to tax when I close the fixed deposit? – Sapna

At the time when the fixed deposit is renewed along with the interest accrued thereon, the interest will be deemed to have been paid and therefore such interest will have to be brought to tax if you are following the cash system of accounting in respect of such source of income being interest from fixed deposits.

It appears that you are not following the mercantile system of accounting as, if that had been so, the interest would have had to be offered on a year-to-year basis when it accrued.

This is in reference to the reply published in respect of the query on setting off of losses from trading in futures and options.

If I satisfy all the conditions that have been stated in the amended provisions of section 43(5) and if my loss is to be treated as non-speculative, can it be set off against income from bank interest and rental income received in the same financial year? – Sundar

If you satisfy all the conditions stated in section 43(5), the loss would be treated as a business loss and not as a speculation loss and can consequently be set off against any income of the year other than salary income.

If it cannot be so set off, it can be carried forward and set off against business income within eight assessment years immediately succeeding the assessment year in which the loss was first computed.

It may be noted that the conditions stipulated in section 43(5) are as follows: The transaction is carried out electronically on by screen-based systems; the transaction is carried out through a registered broker or sub-broker; the transaction is supported by a time stamped contract issued by such broker or sub-broker; the contract note indicates the unique client identity number and permanent account number.

I am a Central Government employee. As I was appointed in October 2005, I fall under the New Pension Scheme. My salary comprised of basic pay, grade pay, HRA, dearness allowance and transport allowance.

Deduction towards provident fund of Rs 3,499 and contribution towards CGEIS is being made from my salary income. Can I get any deduction u/s 80C by investing up to Rs 1,00,000? If yes, how? – Dr Jai Gopal Sharma

You can claim a deduction u/s 80C by making investments.

The maximum deduction available under this section is Rs 1,00,000 and the deduction is available in respect of certain payments and investments.

The payments and investments also include employees' contribution to a recognised provident fund and contributions to CGEIS (Central Government Employees' Group Insurance Scheme).

In your case as you are contributing to a provident fund (if the same is recognized) and to Central Government Employees' Group Insurance Scheme, the maximum investment other than contribution to provident fund and CGEIS that will qualify for deduction will be Rs 1,00,000 as reduced by the amount of contribution to such provident fund and CGEIS.

This deduction can be claimed by you by giving proof to your employer who can take it into account while computing the tax to be deducted at source from your salary or alternatively by filing a return of income and claiming a refund in respect of the excess tax deducted at source or by adjusting it against other tax payable.

Mail your queries to or by post to ‘Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002

Source: The Hindu Business Line