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Home > Business > Personal Finance

Agri income from farm land is tax-free

June 23, 2007 08:55 IST

Excerpts from a Q & A with Tax Expert Subhash Lakhotia on CNBC AAWAZ.

I am an NRI, since the past 11 years. I want to purchase a house for Rs 15 lakh in India and gift it to my younger sister who is married. Can I pay the amount to the owner of the house directly and get the house registered in my sister's name or should I first buy the house in my name and then I should transfer it in my sister's name or should I gift Rs 15 lakh to my sister and then she should buy the house in her name?

I personally prefer the first course of action, but will it technically be a case of gift to my sister and not involve any kind of tax liability on her, or should I adopt any other alternative?

You can without any problem gift the sum of Rs 15 lakh directly in the name of your sister and she can thereafter buy the house property in her name. There is no tax problem in this transaction. There will be no tax problem to you or to your sister. You can therefore go ahead and do the needful immediately without any problem.

I opened a PPF account in name of my son when he was a student. I have been regularly deposited funds out of my income in the account and have not claimed any tax break for the same. My son has now migrated and has NRI status. (1) Can I continue the account? (2) How can I withdraw the money from he account? My son does not have a bank account in India.

You can continue to deposit money in the PPF A/c of your son and you can also avail the benefit of section 80C. For withdrawing the money from the PPF Account you are required to contact the bank for more details.

What are the tax benefits one can take of agricultural land - property buy and sell as well as normal agricultural income?

From your agricultural land you can derive tax-free agricultural income on the one hand, while on the other hand if you sell the land at a later stage, then under certain circumstances the capital gains would be exempt on sale of such agricultural land. However, if you carry on the business of buying and selling the agricultural land then in such a situation you will be required to make the payment of tax on such profit.

My family friend [not a blood relative] wants to gift me a residential property worth Rs 6 lakh bought by her in 2006-07. My question is: 1) Will my friend be paying any tax 2) Do I have to pay any gift tax on receiving this gift of immovable property and if so what will be the amount.
-- Ashaa, Mumbai

Your family friend not necessarily the blood relative can make a gift to you of a residential property without attracting any tax implication. Thus, there will not arise any tax liability on you or on your friend as a result of the said gift.

Sir, my mother has fixed deposit of Rs 1.50 lakh. And she got this money by retirement money of my father. She is also a senior citizen. My question - is a PAN card mandatory to encash the FD on or before its maturity?

Pan number is not mandatory in encashing the bank fixed deposit. Your mother can fill up Form No. 60. If, however, there arises the tax liability on the income of the mother then she should have a PAN Card.

I have purchased one flat in year 2003 for Rs 11 lakh. I have booked another flat on December 2006 with a loan of Rs 50 lakh (I have already paid full amount to builder and my EMI has started). I will get possession of the second flat in Sep-2007. Can I get capital gains tax benefit if I sell my first flat in 2007 and pre-pay the loan with profit (expected Rs 15 lakh)?

Yes, you can sell the first flat and enjoy the tax benefit in respect of the capital gains by linking the investment made in the second flat.

1. Does medical reimbursement up to Rs 15,000 attract FBT? What is the percentage?
2. FBT on LTA? What is the percentage?
3. What is the best compensation and benefits structure for an organisation?

Medical reimbursement will also attract FBT. Likewise, leave travel assistance will also attract FBT. For these items, the rate of FBT would be 30 per cent but the amount on which FBT will be calculated will be 20 per cent of the expenditure on medical reimbursement and LTA. The best compensation structure can be drawn only after studying carefully the calculation of the FBT versus the impact of tax on the employee.

I wanted to know what are all the exemptions and admissible deductions available for salaried class employees

No specific exemption or deduction is available to a salaried employee. The concept of standard deduction for a salaried employee has also gone. The salaried employee at best can plan his salary & perquisite so as to avoid tax on many tax-free perquisites.

Hello sir, I want to know if I can mention the employee portion of the PF amount which I contributed in my salary, is it eligible for the tax savings? Can I mention in my company's tax declaration form my portion of the PF, which I contribute in PF? Thank you

Normally the company itself will give you the tax benefit in respect of your contribution to PF amount. However, if you contact office of PF then do give the details to the employer who will give you the benefit on the same.

Source: Tax Guru