Query

I am employed with a co-operative bank at Mangalore (Karnataka). My taxable salary is below the maximum amount not chargeable to tax. I hold a credit card and have also constructed a house along with my father. The house is at Bangalore and the floor area is 1,500 sq. ft. For this we availed ourselves of a housing loan. As my salary income does not exceed the maximum amount not chargeable to tax, and, therefore, no tax is deducted at source, my employer has not issued a Form 16. I do not have any other source of income. Do I have to file a return of income?

Srinath S. D.

Reply

The proviso to Section 139(1) provides that a person not furnishing a return under Section 139(1) and residing in the specified area must furnish the return if any one of the following economic criteria is satisfied:

has incurred expenditure for himself or any other person on travel to any foreign country;

In the instant case, as the last but one economic criteria is satisfied, you will have to file a return before October 31 of the relevant assessment year. This is despite your total income not exceeding the maximum amount not chargeable to tax (Rs 50,000, at present).

It may be noted that income from house property is chargeable on a notional basis even if it is not actually let in certain cases. In the instant case, the purpose for which the property constructed has been put to has not been indicated. Also not indicated is the questioner's share in the property, which would go to determine whether the first of the economic criteria is satisfied or not. In any case this is academic, as, even if this criterion is not satisfied, a return will have to be furnished as the credit card condition has been satisfied.

Query

I had invested in UTI MEP 92. At that time I was allowed 100 per cent deduction from my income in respect of such investment under Section 80CCB. On maturity, the units have been redeemed. This redemption took place in April 2002. Tax was deducted at source at that time at 20 per cent. How is this redemption money to be accounted?

V. Padmanabhan

Reply

The difference between the amount invested and the repurchase price is to be treated as capital gains and taxed under that head. If the asset is long-term, whether indexation benefit is available is is not clear.

A plain reading of Section 45(6) gives the view that the benefit of indexation will not be available even if the asset is a long-term one. A contrary view, on the basis that sub-section (6) of Section 45 does not override Section 48 which allows the benefit of indexation but only overrides sub-section (1) of Section 45, has also been proffered. It is felt that the benefit of indexation should be available even in such cases where there is a repurchase of units referred to in the Section 80CCB. This, it appears, is the fair view.

It may be noted that Section 45(6) does not seek to override Section 48 or the proviso to Section 48, which provides for the benefit of indexation being made available on the transfer of a long-term capital asset. It may also be noted that wherever the benefit of indexation is sought to be denied, the legislature has expressly excluded the operation of the proviso to Section 48. A view that the benefit of indexation will not be available has been taken in ACIT vs G. Rajaiah Setty (2002 81 ITD 451 Hyderabad).

The amount originally invested will now be treated as income from other sources and taxed accordingly.

Business Line invites queries on personal taxation issues to this column. Queries may be sent to `Tax Talk', Kasturi Buildings, 859, Anna Salai, Chennai-600002, or by e-mail to taxtalk@thehindu.co.in (Readers are requested to mention `Tax talk' in the subject line of their e-mails.)

Article E-Mail :: Comment :: Syndication