The Hindu Business Line : No tax for the money savvy house-wife

I AM a housewife. I have a monthly income of around Rs 1,000 that I earn from conducting tutorials. Out of this income I invested in shares and earned a short-term capital gain of Rs 80,000 in the financial year 2004-05.

My total income for the year is Rs 92,000, including the short-term capital gain. Is my income chargeable to tax?

T. S. Ruby

Reply

Since your total income is less than Rs1 lakh you will not be liable to pay tax for the financial year 2004-05 (assessment year 2005-06). This will be so since you will be eligible for the rebate under 88D, which will reduce your tax to nil.

Query

My mother and myself are joint owners of a property in Delhi. This property is a flat, which belongs to a society and we, being shareholders of the society, own the property. The share certificates do not specify the percentage of ownership held by each of us. The property was acquired with my mother paying 10 per cent of the cost and me, 5 per cent. The balance was funded through a loan taken from a bank. I am paying the EMI. Will it be possible for me to claim the entire tax benefit in respect of the EMI paid?

S. Mehta

Reply

The answer to your question will essentially depend on the respective shares held by you and your mother in the property.

If it is understood that your mother owns only 10 per cent of the property, you will be able to claim the entire tax benefit in respect of the principal repayment and the interest. The percentage of ownership can be established by an understanding between your mother and you, which may be reduced to writing.

Query

I took a housing loan with my wife as co-applicant. The house is registered in our joint names. Can I claim the full tax benefit in respect of the interest and principal of the housing loan? I pay the EMI is borne by me and that my wife has an income that is below the taxable limit.

Rajendra Singh Bhoj

Reply

Though the house property and the loan are in joint names, if you are the full owner of the property, you can claim the entire tax benefit in respect of the interest and principal.

Query

After serving for 33 years for a public sector general insurance company I opted for VRS in May 2004. I received Rs 8,90,000 as compensation. When I opted for VRS I had two years and nine months of service left.

I understand that I can claim exemption under Section 10(10C) to the extent of Rs 5 lakh. Will the balance of Rs 3,90,000 be eligible for relief under Section 89(1)?

Venkat

Reply

You cannot claim relief under Section 89 read with Rule 21A in respect of the balance of Rs 3,90,000 since the unexpired portion of your term of employment is less than three years.

Rule 21A(c) provides for the relief on the amount received in connection with termination of employment only if the employment has been exercised for at least three continuous years and where the unexpired portion of the term of employment is also not less than three years.

It may be noted that if the condition is satisfied, the relief under Section 89 will be available in respect of the compensation received, which is in excess of the amount exempt under Section 10(10C).

Query

My husband passed away last year. His returns for the financial year ended March,2004 have not been filed. Prior to his death he was employed and was earning a salaried income. I am also employed and earn a salary. For the income earned by him during the financial year 2004-05 and the financial year 2005-06 up to the date of his death how is the return to be filed?

Anonymous

Reply

For both the years a return will have to be filed in respect of the income earned by your husband by his legal representative. Section 159 provides that the legal representative will be deemed to be an assessee and also provides that the legal representative will be liable to pay any sum which the deceased would have been liable to pay if he had not died in the like manner and to the same extent as the deceased.

Query

I purchased a plot of land in 1995. During the financial year 2004-05, I sold the land and purchased a house from a housing society. The house will be complete in the financial year 2005-06.

Will the gain from sale of land be eligible for exemption? I already own a house in the same city.

Ajay Gupta

Reply

Exemption can be claimed by you under Section 54F. For claim of the exemption under this section the following conditions need to be fulfilled:

The assessee is an individual or HUF.

The gain arises from the transfer of a long-term capital asset not being a residential house.

The assessee does not within a period of two years purchase or three years construct any residential house other than the new house.

The assessee is not the owner of more than one residential house (other than the new asset) on the date of transfer of the original asset.

The quantum exempt will be on the following basis:

If the amount invested is more than or equal to the net consideration then the entire capital gain.

If the amount invested is less than the net consideration than the amount invested x capital gain/net consideration.

You may also note that for the purpose of claiming the exemption under Sections 54F, the amount not invested towards purchase of the new asset within one year before the date of transfer or which is not utilised for the purchase or construction of the new asset before the due date for furnishing the return of income for the relevant assessment year may be deposited before the due date for furnishing the return of income, in any bank or institution in a specified account known as "Capital Gains Account Scheme". The proof of having so invested the same should be furnished along with the return of income and if this is done, this amount invested will be deemed to have been utilised for the purpose of purchase or construction of the new asset. The amount so invested may be withdrawn for the purpose of purchase or construction of the new asset within the specified time. If within three years from the date of transfer of the original asset, the money so invested is not utilised for the purpose of investment in the new asset, the same shall be treated as income of the year in which the three year period from the date of transfer of the original asset expires.

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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