'Please suggest any investment options to save tax.'
Anil Rego, CEO, Right Horizons, answers your personal income tax queries.
Yogesh Choulera: I read your article on saving capital gain tax on sale of mutual funds and shares on Rediff.com. I have one query please. Request that you solve it.
I sold my mutual funds, from five or six funds, in the financial year 2020-2021. These investments were with me for many years and I needed the money for my newly constructed home.
Can I save the capital gains tax by showing evidence of construction of the home, which is in my name and it the only home I have?
Can I save the long-term tax by showing that the proceeds were used in newly constructed home?
Anil Rego: There is exemption of long-term equity shares/mutual funds under Section 54F, when the sale proceeds are utilised for the purchase of a new residential property.
The limit of exemption is = Amount Reinvested* capital gains/net consideration
- The new residential property should be purchased one year before or within two years after -- three years, if the property under construction -- the sale of the capital asset whose capital gains is being reinvested.
- No additional residential property should be purchased within one year (three years in case of house under construction) from the date of sale of shares/mutual funds.
- The new residential property purchased should not be sold within three years of its purchase/construction
If these conditions are not met, the exemption available on the sale of shares shall be withdrawn and it shall be charged to tax as capital gains in the year of default.
Falguni: I am working with a private organisation and my monthly salary is Rs 70,500. Kindly note my 80C is full. 80D is also full. Will invest in NPS also. Still I have to pay tax.
Please suggest any other investment where I can invest and save tax.
Anil Rego: Since you have covered many of the commonly used tax saving options, the few available exemptions/deductions are:
- Tax saving on home loan interest paid, under Section 24, upto Rs 2 lakhs
- Tax savings on interest repayment on a home loan for first-time owners, under Section 80EE, upto Rs 50,000 (the value of the house to be less than Rs 50 lakhs and the loan less than Rs 35 lakhs) over and above the deduction of Section 24 above.
- HRA/tax savings on rent paid in cases where HRA isn't paid under Section 80GG, upto Rs 60,000 in a financial year (deduction is not applicable to taxpayers who own a house, but live in a rented house in the same city). It cannot be availed by taxpayers who own a house in another city and claim tax deduction under Section 24 towards repayment of home loan interest on that house)
- Leave Travel Allowance under Section 10 (5) for domestic travel
- Tax savings on interest earned from savings bank accounts under Section 80TTA, for a maximum limit of Rs 10,000
- Reimbursements: You need to check with your company on the various reimbursements possible, like medical, transport allowance, food coupons, vehicle reimbursement, etc
Damodar Pohuja: I have've question related to Leave Travel Allowance exemption. Can I claim LTA exemption for two separate journeys, made in two consecutive calendar years, but in same assessment year?
First journey: December 2020
Second journey: January 2021
I haven't claimed any exemption in the current block of four years.
Both journeys are not in continuity. LTA has been paid by company separately. Both fall in same assessment year. Further I wish to utilise the cash voucher scheme.
Anil Rego: LTA exemption is available for only two journeys performed in a block of four calendar years. So you can claim for those two journeys which fall in the block of four calendar years, since you have not claimed in the same block.
The cash voucher scheme is an alternative to LTA/LTC. As per the scheme, you will have to purchase goods and services attracting GST of 12 per cent, or more, by digital means between October 12, 2020, and March 31, 2021. The individual would then be allowed to claim one third the amount of the bills as tax exempt LTA/LTC, without submission of travel proof.
You can claim a maximum of one-third of the amount spent or up to Rs 36,000 per family member, whichever is lower by submitting bills.
You need to choose between cash vouchers and LTC. You can't claim both together
Archana Gupta: I have the following income sources:
- House rent
- Bank interest
- Small share jobbing income (less than Rs 2,000)
- Small income from private tuitions (approximately Rs 50,000)
Which ITR should be used for filing return for AY 2021-22?
Note: I was employed till March 2020 and hence was filing regular returns using an ITR-2.
Anil Rego: Income from private tuitions and share jobbing come under the head: Income from business or profession. It requires you to file an ITR-3, especially since you don't seem to have any other major source of income. From FY 2021, you will need to file an ITR-3.
M K Goenka: I am a senior citizen. I am 68 years old.
I have income from the dividends of mutual funds and interest from company fixed deposits. I regularly file an ITR 2.
I had given a loan to one of my cousins, but he is neither returning the principal amount, nor paying any interest. I had, therefore, filed a legal suit against him for recovery of my dues and I incurred expenses worth Rs 45,000 for court stamp charges and advocate fees.
Can I set off this expense of Rs 45,000 against the other income from dividends and interest?
I would be obliged to have your reply. If yes, under which column should I claim it, because I cannot find any column in the new ITR 2
Anil Rego: You cannot set off court stamp charges and advocate fees, spent on your legal suit with you cousin, against interest income and dividend income. You can only set off expenses directly related to the source of the income.
Do you have any personal income tax query? Please mail us at email@example.com with the subject line 'Ask Anil' and Anil Rego will answer all your tax queries.
Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.
You can find more of Mr Rego's answers here.
Feature Presentation: Ashish Narsale/Rediff.com