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T. Banusekar

I AM employed by an American company and I work from my residence in India. My employer pays me $1,200 per month and this is paid to me by wire transfer. Is this taxable? If yes, how do I file a return of income?

Sam

Reply

The income that you receive by way of salary will be taxable in India. You will have to file a return of income in the normal course like any other salaried employee. You may note that your employer will be bound to deduct tax at source on your salary under Section 192 of the Act. Also, under Section 163 of the Act you can be treated as an agent of the non-resident. And under Section 160 read with Section 161 all obligations of the non-resident are cast on the agent of the non-resident which will mean that you can be held responsible for a failure to deduct tax at source.

Query

I am retired person aged about 63 years. I have now taken up another employment. I own a house, which is more than 30 years old, and I have not taken any housing loan for buying this house. I am an income-tax assessee since 1968 and I now wish to purchase a flat for about Rs 10-12 lakh. Can I get tax benefits in respect of the principal repayment and interest if I take the housing loan from a bank for purchasing the flat?

G. Mathen

Reply

You can claim the interest on housing loan as a deduction in computing income from house property and also claim deduction under Section 80C in respect of the principal repayment of the housing loan. If the property is self-occupied, the annual value will be taken as nil and the interest can be claimed as a deduction subject to a limit of Rs 1,50,000. If it is let out, the municipal taxes paid can be claimed as a deduction against the rental income and the interest can thereafter be claimed without any limit. You may note that only one house property can be claimed as self-occupied. The other property will have to be treated as a deemed let-out property.

Query

I sold some shares in July last, that is, year before the introduction of the securities transaction tax. What is the tax rate applicable on the gain from such sale? Please note that the gain is a short-term capital gain. Can I claim the account opening charges as a deduction in computing the gain?

M. Lakshmivaraghan

Reply

The normal rates of tax applicable to an individual will apply in respect of such short-term capital gains derived from the sale of shares prior to the introduction of the securities transaction tax. The tax rate will depend on the slab at in which you are assessed to tax. You will not be able to claim the account opening charges as a deduction in computing the gain. What can be claimed as a deduction is only such expenditure as is incurred wholly and exclusively in connection with the transfer and it cannot be said that the account opening charges are incurred wholly and exclusively in connection with the transfer and, therefore, cannot be allowed as a deduction.

Query

I work in a multinational company and my gross salary is more than Rs 6 lakh per annum. I am, therefore, not able to claim the tax rebate under Section 88. Can you suggest how the rebate can be utilised?

Athinarayanan

Reply

The rebate under Section 88 can be claimed if the gross total income does not exceed Rs 5 lakh. If your gross total income exceeds Rs 5 lakh, there would be no scope for claiming the rebate. You could consider taking a housing loan and claiming interest as a deduction, so as to bring your gross total income below Rs 5 lakh, thereby entitling you to the rebate under Section 88. You may note that for the assessment year 2006-07 (previous year 2005-06) there will be no rebate under Section 88, instead you can claim deduction under Section 80C. Section 80C does not provide that if your gross total income exceeds Rs 5 lakh, you will not be entitled to the deduction. This will mean that you can claim the deduction even if your gross total income exceeds Rs 5 lakh.

Query

Is it compulsory for an employer to require an employee to furnish the particulars of salary from his previous employer in Form 12B. Most employees do not furnish the same. If they do not furnish the same, what is the recourse available to the employer and how can the employer deduct tax at source? In case tax is not deducted at source, is it mandatory for the employer to issue Form 16? If not, how is certificate to be issued of the salary of the employee?

Ramesh

Reply

The deduction of tax at source is to be by such employer as the employee may choose from the aggregate salary of the employee who has been in receipt of salary from more than one employer.

The employee is required to furnish details of the salary from the other employer to the employer of his choice in writing. Such chosen employer is required to deduct tax at source on the salary of the other employer as well.

If the other employer has also deducted tax at source, the chosen employer may take cognisance of the same. There is no mandate that the employee must give the particulars as stated; it is only optional. If the employee does give particulars to the employer of his choice, it is mandatory for such employer to take the particulars given into account in determining the tax to be deducted. In other words, the employer cannot insist upon the employee furnishing the said particulars.

Under Rule 31, a certificate in Form 16 is to be issued only if tax has been deducted at source.

If no tax has been deducted at source, there would be no mandate to issue Form 16 though there would be nothing wrong in issuing the said form. The employer may alternatively give a salary certificate evidencing the payment of salary.

Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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