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You had bought a spanking new car last year and are paying interest on it. While you get tax exemption on interest paid on your home loan you are not sure if you can avail of the same benefit on your car loan.
Can you get tax exemption on interest paid on car loans? Will it make any difference if you are a salaried individual or self-employed professional?
Want to know about the tax benefits of Section 80D? Has anything changed about it in the Union Budget 2007-08?
You company has given you ESOPs and you don't know how will FBT eat into it?
Tax expert Mahesh Padmanabhan of RelaxwithTax answered these and other tax related queries in a chat with Get Ahead readers on March 7.
For those of you who missed the chat, here is the transcript.
Sriram1 asked, Hello sir, Can we get tax exemption on Car Loans, atleast the interest part as we get in case of Home Loans?
Mahesh Padmanbhan answers, In case you are a professional or a business man declaring income under the head profits or gains from business or profession then the interest on car loan and depreciation could be utilised. However, in case you are a salaried individual then you would not get any deduction on this account.
Sarvesh asked, Hi Mahesh, I had taken a home loan in June 2006 and the bank had disbursed the entire amount. However as I'll be getting the possesion only somewhere in May, I could not get any tax benefit on the Interest paid. I was told that i could get the tax benefit on the same in the next 5 years(1/5th each year). Can you please clarify my doubt as how will i be able to get the tax benefit?
Mahesh Padmanbhan answers, The relevant fact that is pertinent here is that the construction should have completed. You may or may not have taken possession of the flat but if the agreement has been executed and the construction has been completed then the interest and principal deduction would be available.
In case the conditions are not satisfied then the interest as well as the pre-emi interest paid till such date is accumulated and the benefit for such amount is taken in 5 equal installments however within the overall ceiling of Rs. 150000 for the interest deduction
natesan asked, I am a salaried employee. Pl let me know the tax benefits of sec 80(D) is it 100% or is it within Rs 1 Lakh exemption. Also there is a provision to claim mediclaim which is to the tune of Rs 10,000 for salaried. Is there a change in the benefit in this budget i.e. medical premium is it covered under this category?
Mahesh Padmanbhan answers, Section 80D stipulates the deduction for payments made towards effecting medical insurance and is outside the scope of section 80C which has a ceiling of Rs 1 Lakh. The ceiling for sec 80D is Rs 10,000 (in case premiums are paid for individuals below 65 years) and Rs 15,000 (in case it includes premium paid for persons above 64 years). The same has been proposed to be amended to Rs 15,000 and Rs 20,000 respectively.
harish asked, Hi Mahesh, I have changed my job in last July 2006. To file tax return : 1. do i have form 16 separately from my earlier & present employer ? 2. My past employer says that the form no. 16 will be provided to me for the period of April-July 2006 , by this Jule 2007, whereas my present employer requires it by March 2007 end. How i have to deal fairly with both these ? Regards.
Mahesh Padmanbhan answers, Though technically your previous employer would need to give you the relevant form 16 before April 30, 2007, in the current instance, you could ask for a signed tax estimation from your previous employer and submit the same to your current employer. This would enable the current employer to take correct deductions provided by the previous employer as also the correct TDS that has been effected by them.
Ashu asked, Dear Sir, Can you clarify this ESOP FBT proposed in new budget? Is it ESOP that are allocated previously, say prior to 1 April 2007, but not exercised yet, will there be FBT charged for these ESOPs. OR. The FBT will be charged for ESOP's allotted after 1st April 2007?
Mahesh Padmanbhan answers, The valuation rules for the taxation of ESOP has not yet been clarified and hence we need to wait and watch the exact methodology of taxing the same. The finance minister is in the process of deliberating with industry representatives to firm up a reasonable taxation process
prasad asked, just i want to how much interest & principal amount is exempted?
Mahesh Padmanbhan answers, hope you are referring to the deductions available for housing loan. The amount available as deduction for interest payout for self occupied property remains at Rs 1.5 lakhs and that of principal repayment is within the ceiling of section 80C i.e. Rs 1 lakh. In case if you have let out property, there is no ceiling for the interest payout.
Suman Shaw asked, Is PAN card necessary for every person? What is the advantages of the PAN card? Please let me know the above questions. Also tell me that upto which amount of salary I don't have to pay any Inmcome Tax.
Mahesh Padmanbhan answers, PAN Card is mandatory for all individuals in case they have income in excess of the minimum threshold limits. However, PAN is now widely used for all financial transactions including purchase of house, opening of bank accounts, trading in shares/mutual funds etc. The threshold limit of exemption from tax for ladies is Rs 1.35 lakhs, for male individuals it is Rs 1 lakh and for senior citizen (above 64 years) is Rs 1.85 lakh
latif khan asked, is school bus fare exempted under section 80C?
Mahesh Padmanbhan answers, no, only school tution and term fees are covered under sec 80C
subodh asked, if my father earns money via MIS post system . is he paid tax. his total amount of MIS interest is Rs 72,000.
Mahesh Padmanbhan answers, MIS from post office is taxable income.
However, you need to consider whether this income, in conjunction with all other income earned by your father after all deductions, does exceed the threshold exemption limit or not. In case your father is a senior citizen then the threshold limit is Rs 1.85 lakh and if not then it is Rs 1 lakh. If the total taxable income is below these limits then he is not liable to pay any income tax.
om asked, Sir, I have been working in a company from Apr '06 - March '07 . Since i am not serving the full notice period of 3 months & serving only 1 month . 1 months salary is withheld & I am paying 1 months salary . But i am asked to pay taxes for 12 monts salary .Is it for 12 m,12-2m(paid by me).what is the section that deals with it?
Mahesh Padmanbhan answers, notice period deduction is technically not deductible from your salary.
Accordingly, you will be liable to pay tax on all salary income received by you. An example would be in case you have worked for 10 months and have got paid for this period, you will need to pay tax on this salary. Additionally you would be needed to pay your employer the notice period salary as penal provision for not complying with the company rules. Pls note that you would not get any deductions for such notice period amount paid by you.
Tomorrow: Part II
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