Financial Daily from THE HINDU group of publications
Sunday, Jun 20, 2004
Financial Daily from THE HINDU group of publications Sunday, Jun 20, 2004 |
|
|
|
|
|
Investment World
-
Income Tax Columns - Tax Talk Loan for a house in a different State T. Banusekar
Ankit Reply The principal repayment will qualify for rebate under Section 88 provided your gross total income does not exceed Rs 5 lakh. The maximum amount that will qualify for rebate will be Rs 20,000. It may also be noted that the rebate under Section 88 is available subject to certain overall limit, which is shown in the Table. The interest paid will qualify for deduction in computing income from house property. The interest that can be claimed as a deduction will be a maximum of Rs 1,50,000 if the property is self-occupied and can be claimed without any limit if the property is let out. This deduction is available under Section 24 of the Act. QUERY: My friend, who is an NRI, wishes to sell his house in India. He proposes to invest the capital gains arising out of the transfer in bonds of Nabard. When he redeems the bonds, on maturity, will he be liable to pay tax on capital gains, which was earlier exempt as a result of investment in the bonds? Adil Ashok Reply There will be no capital gains tax when the bonds are redeemed on maturity. Section 54EC of the Act provides for an exemption in respect of capital gains on investment in the bonds of Nabard, National Highway Authority of India, Rural Electrification Corporation, SIDBI or National Housing Bank which are redeemable after three years. This exemption is available if the capital gain is from the transfer of the long-term capital asset and where the investment is made before the expiry of six months from the date of transfer of the capital asset. The capital gains once exempt as a result of the investment in the bonds as stated above will not become chargeable if the bonds are redeemed on maturity. Query I sold a vacant land for Rs 11 lakh in June 2003. The capital gain on the transfer is around Rs 8 lakh. I have purchased another vacant land for Rs 8.25 lakh in the name of my wife. Will I be eligible for any exemption in respect of the gain as a result of the re-investment? Acharya Reply There is no exemption under the Act on the sale of a vacant land and re-investment in another. Given this, the issue of whether the exemption is available even where the re-investment is in your wife's name while the capital gain arose in your name is not gone into. Query A house is owned by the HUF of which I am the Karta. This house was allotted to me on a complete partition on my father's HUF. What will be taken as the cost of acquisition of this house when it is sold and how will the capital gain be computed? Will the guideline value be taken as the consideration in such a case? Shyam Jaisingh Reply The cost of acquisition on the sale of the property will be taken to be the cost of the previous owner based on Section 49(1) of the Act. The capital gain will be computed as follows: Full value of consideration — A Less: Expenditure incurred wholly and exclusively in connection with the transfer — B Net consideration (A-B) — C Less: Cost of acquisition and cost of improvement — D Capital gains subject to exemptions (C-D) — E In the case of long-term capital gains, cost of acquisition and cost of improvement are to substituted with indexed cost of acquisition and indexed cost of improvement. This will not apply in case of bonds or debentures other than capital indexed bonds issued by the Government. Indexed cost of acquisition means: Cost of acquisition x cost inflation index of the financial year of transfer / cost inflation index of the financial year in which the asset was first held by the assessee or the cost inflation index of the financial year 1981-82, whichever is later. Indexed cost of improvement means: Cost of improvement x cost inflation index of the financial year of transfer / cost inflation index of the financial year in which the improvement took place. Though on a plain reading of Section 48 it appears that the indexation benefit will be available only from the date on which the asset was held by your HUF, it appears that the benefit should be available even from the financial year in which the asset was held by your father's HUF. In this connection you may refer to Pushpa Sofat vs ITO (2002 81 ITD 1 Chd). Under Section 50C, on transfer of immovable property, the full value of consideration shall be taken as value for which the property is registered with the registration authorities. If the assessee takes a lower value as the full value of consideration the assessing officer (AO) may refer the matter to a valuation officer. The value as determined by the valuation officer shall be binding on the AO insofar as it does not exceed the registration value. If the assessee takes the registration value as the consideration and also where there is an appeal or revision made under that law and if the value gets reduced, the capital gain shall be recomputed accordingly by invoking Section 155. Query I purchased a flat in December 1997 and sold the same in April 2003. What will be the cost inflation index applicable for these years? Rajesh Reply The cost inflation index of the financial year 1997-98 is 331 and that of the financial year 2003-2004 is 463. Query I have opened an RD Account with a nationalised bank in 1993. The account matured in 1998 and since then I have not withdrawn the money in the account. The bank pays me interest on the balance standing in the account. Will the interest qualify for any tax benefits? Ramanathan Reply Interest from a nationalised bank will qualify for deduction under Section 80L. The deduction would be subject to a maximum of Rs 12,000. It may be remembered that there are other items of income which also qualify for the deduction and which will also fall within the ceiling of Rs 12,000 mentioned above. Query I had taken a housing loan in my name and purchased a house. In the second year after taking the loan, I was advised by the bank to take an insurance policy. Under this policy, in the event of my death the entire outstanding to the bank on the loan will be repaid by the insurance company. Will the premium paid on such policy qualify for rebate under Section 88? Loganathan Reply The reply to your query will depend on the nature of the policy. If the policy is life insurance, the premium paid will qualify for rebate. Rebate under Section 88 will be available only if your gross total income does not exceed Rs 5 lakh. It may also be noted that the premium up to 20 per cent of the basic sum assured alone will qualify for rebate. (Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.)
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|