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Your tax queries, answered!
Moneycontrol.com | March 30, 2007 10:08 IST
The scene: Income tax officials used to send separate notices asking for details on Fringe Benefit Tax, Tax Deducted at Source and wealth tax.
The scene as it should be: Income tax and FBT can be filed on a single income tax return form.
What it means: Income tax payers can now file their tax returns more easily, says tax expert Subhash Lakhotia.
Excerpts from an interview with CNBC-Awaaz:
Why do we have separate dates for assessment of wealth tax income tax, FBT or TDS? It creates problems for taxpayers.
That used to be the case earlier. Income tax officials would send separate notices seeking details on FBT, TDS and wealth tax. Now, income tax and fringe benefit tax can be filed on a single income tax return form. This makes it easier for income tax payers to file their tax returns.
I would like to request the finance minister to allow filing of return of the taxes -- income tax, FBT and wealth tax -- on a single form. This will lead to income tax officials giving only one notice to a taxpayer to get him to explain things rather than sending multiple notices.
This way, taxpayers and the income tax department will save on time. Before it happens, our Parliamentarians and Finance Minister will have to create special provisions to solve the problem of taxpayers.
Tax deduction on mediclaim premium has been increased to Rs 20,000. Unless companies start offering mediclaim polices to senior citizens, the budget announcement offering tax exemption on medical insurance for senior citizens has no meaning. What is the solution?
-- JP Bhalotia, trader and senior citizen, Kolkata
It is best to take a mediclaim policy cover well before you reach 65 years of age. Else, it becomes difficult for senior citizens to get a mediclaim policy for even Rs 5 lakh.
Since insurance companies are reluctant to give old people medical insurance, the government should allow them tax deduction on producing medical bills to the tune of Rs 20,000.
If we compare mediclaim policy with ESI, one needs to be hospitalised for at least 24 hours to avail benefits specified under mediclaim policy. The same is not true for availing benefits under ESI. The government should promote social security schemes for senior citizens. The premium of mediclaim policies should be reduced for senior citizens.
I had taken a plot of land on installment from a developer in 1997, took possession in October 2003 and registered it in April 2005. I then bought a flat with my wife in February 2006, for which 90 per cent of the payment was made from my income. The flat is yet to be registered. What should I do to keep away from capital gains tax?
-- Rajesh Chopra, bank employee, Noida
Whenever you want to sell a property, whether land or flat, sell it three years after taking possession of the property. When you sell it after three years, your gain will be called long-term capital gain.
You can save long-tern capital gains tax if you sell it after three years, provided you buy a house in two years or buy land and construct a house on it in three years.
As far as buying a property jointly is concerned, co-owners do not get tax benefits individually. To avail tax benefits, like in your case, husband and wife have to make investment pro rata to a percentage of ownership. If the wife doesn't have money, she can take a loan from husband. But she should not take a gift from the husband.
Since you bought the property jointly with your wife and have made the payment, capital gains incurred on its sale will be in your name.
I live in a rented house for which I pay Rs 4,000 per month. Can a retired employee avail tax deduction on rent like a government employee?
-- YS Dhake, Mumbai, retired government employee
As per 80 GG of the IT Act, tax deductions can be availed on the rent payment. If you live in a rented accommodation and not in your own house, and pay tax, you are entitled to get a tax deduction against rent payment, provided the rent payment is 10 per cent more than your income.
You, your wife and minor children, should not own a house. You will get tax deduction up to 25 per cent of the income, but not to exceed Rs 2,000 per month. You also have to fill form no 10BA along with your tax return form.
I took a home loan in 2001 to buy a flat. I have paid it off. Now, I want to take another home loan. Will I get tax exemptions?
-- Tejas Khelia, lecturer, Ahemdabad
If you are buying a second house, the interest payment will not get you tax exemption. But when you give it on rent, interest payment without any upper limit will be deducted from the rental income and entire interest payment will get you tax deduction.
Repayment amount for the second house will not get you tax deduction under 80C of the IT Act.
I own a piece of land which I want to sell. How can I save capital gains tax?
-- Moomal Bhandari, trader, Udaipur
Only if the land was bought three years ago can you save capital gains tax. If you sell land before three years, short-term capital gains tax will be charged on the total capital gain incurred.
If you sell the property after three years, you have a number of options to save capital gains tax. You can take the benefit of cost inflation index. After getting long-term capital gains, ie, sale price minus cost price take cost indexation price as cost price, pay 20 per cent income tax on the remaining sum.
If you don't want to pay tax, invest in 54 EC bonds, such as REC (Rural Electrification Corporation) and NHAI (National Highway Authority of India) bonds. If you want to save tax and don't want to invest in bonds, buy a house in the next two years or invest in land and build a house on it in the next three years. This way, you pay no tax on the sale of the property.
My son has worked for three companies in this financial year. The first two companies have not given him his Form 11 yet. The third company will issue Form 16 at the end of this financial year. No company has deducted his income tax so far. What should he do?
-- Moomal Bhandari, trader, Udaipur
When your son joined the other job, he should have told the new employer about previous salary to allow him to cut tax after adding it with his current salary.
He should have told the third employer about previous salaries to allow him to cut the tax. Since the employer has not cut your tax, add up your salary and pay tax on it.
I haven't received tax refund filed in 2006.
-- Shiv Narayan Singh, government employee
Write to the income tax officials saying you haven't received the tax refund. Also mention refund receipt number. In big cities, the government plans to hand over a list of refunds to the state bank and state bank will deposit the refund amount in your account.
My nephew is going to Singapore on a work contract of three months. Where does he pay the income tax?
-- Suresh Pople, Noida
You don't have to pay tax in India if you are living abroad for 182 days. If you are an Indian citizen, you have to pay tax on income earned in India and abroad. If you are not an NRI, all your income will be taxed in India. If you live abroad for over 182 days, you get NRI status. For more details, you have to study the double taxation a voidance treaty between India and that country.