Can I forward losses in I-T returns?

According to the Income Tax Act, losses under ‘house property’ can be carried forward even if the return is not filed on time. The loss can be carried forward for the next eight years and can be set off against income under the head ‘Income from house property’.

Q. I filed my income-tax return with the help of a consultant. I had incurred a tax liability of Rs 22,000 and the consultant added interest to it under Sections 234B and 234C. When is the interest applicable and how is it calculated?
- Rishi Joshi

A. If an individual defaults in paying advance tax or the tax paid by him is less than 90% of the total assessed tax as on 31 March, then he needs to pay interest under Section 234B. In such a case, simple interest at the rate of 1% is charged for every month for which the payment is to be made.

Penal interest under Section 234C has to be paid if a specified percentage of advance tax is not deposited before the due date. There are three deadlines to pay advance tax—15 September, 15 December and 15 March.

If no advance tax is paid before these dates, or if the tax paid is less than 30% of the payable tax (for the first deadline), 60% of the payable tax (second deadline) or less than the due tax (last deadline), then the assessee will have to pay an interest at 1% per month on the amount of shortfall. In the case of the first two deadlines, interest will be charged for only three months.

Q. I was unable to file my income-tax return on time as I was travelling abroad. I have incurred losses in share trading and under ‘house property’. Can I carry forward the losses?
- Raj Narain

A. According to the Income Tax Act, losses under ‘house property’ can be carried forward even if the return is not filed on time. The loss can be carried forward for the next eight years and can be set off against income under the head ‘Income from house property’. However, losses under other heads of income, such as business and share trading, can be carried forward only if the return is filed by the due date.

Q. My bank has deducted tax at source (TDS) on the interest income earned from my fixed deposit though I have not received the income. Can the bank do this?
- Diwakar Shetty

A. Banks deduct TDS on fixed deposits if the aggregate interest exceeds Rs 10,000 a year per bank branch. The tax is deducted at the rate of 10%, along with cess, as applicable. In case your income exceeds the basic exemption limit and tax is payable at the slab rate of 20% or 30%, the differential tax has to be paid by you.

The bank may not deduct TDS on the interest income earned from a savings account or a fixed deposit if it is below the limit, but you will still have to pay tax on it at the applicable rates. You will need to pay tax even if the interest income is earned on an accrual basis.

Provident Fund
Q. I invest Rs 70,000 every year in my minor daughter’s PPF account. Am I eligible for Section 80C benefits for this investment? Will the interest earned be clubbed with my income if the exempt, exempt, tax (EET) regime comes into force in 2011?
- Sandeep Kumar

A. Under Section 80C, you can claim a deduction of up to Rs 70,000 a year for contribution to your minor daughter’s PPF account. However, this amount has to be within the annual limit for investing in a PPF account. The contribution to a minor’s PPF account is clubbed with that of the parent and the combined amount cannot exceed Rs 70,000 a year.

The interest earned on PPF is exempt from tax under Section 10, so as per the current law, the issue of clubbing the income does not arise. The new Direct Taxes Code proposes an EET regime for the PPF scheme, under which the contributions made after 1 April 2011 shall be taxable at the time of maturity. All contributions up to this date and the income from these investments will continue to be under the exempt, exempt, exempt (EEE) regime.

If the new tax code comes into force and the contributions after 2011 are taxed at maturity, the basic rules are likely to remain the same. Any investment in your minor daughter’s account will be treated as a gift to her, but any withdrawals will be clubbed with your income. If your daughter is 18 years old at the time of the PPF’s maturity, the income will be taxed as her personal income.

Q. I had taken a loan in April 2007 to buy a shop, for which I have been paying an EMI of Rs 13,400. I rented out the shop in August 2008 and have been receiving a rent of Rs 10,000 a month. I have not paid any tax on this income. Should I pay it now? I’m paying the property tax and maintenance charges to the complex where the shop is located. Am I eligible for any tax deduction?
- Rohit Telang

A. The tax on the rental income that you received between August 2008 and March this year should have been paid by 15 March 2009 and the income should have been reported in the tax return for the financial year 2008-9. If you haven’t filed your return, do so after paying the tax, along with a 1% interest per month since March. If you have filed your return for 2008-9, you can file a revised one.

The rent received should be mentioned under ‘Income from house property’. You are entitled to a 30% standard deduction on this income along with the deduction of the municipal taxes paid by you. Your rental income can be computed as follows:

You are not eligible for any tax gains because it is a commercial property and such benefits are available only for residential property.

Mutual Funds
Q. I invested Rs 7,500 in the Sundaram BNP Paribas Select Focus fund last month. I want to start an SIP of Rs 1,000 in the same fund. What are the entry and exit load rules? Can I stop the SIP before the agreed term?
- K. Janaki Vallabhan

A. To start a systematic investment plan, you will have to fill up a form for SIP investment and deposit postdated cheques or get an ECS mandate.

The entry load has been removed for all mutual fund investments from 1 August 2009. So your SIPs will not incur any entry load. However, an exit load of 1% will be charged if the investment is redeemed before one year. This is applicable to each SIP instalment as well. You can stop your SIPs in any fund, but must submit the request at least one month prior to the next due date.

Q. My father wants to gift me the shares he had bought over 10 years ago. What is the procedure? Will I have to pay any tax?
- Puneet Upadhyaya

A. Your father can transfer the shares to your demat account through an off-market trade. He will have to fill up a form stating the reasons for passing them on. There is no tax implication because a gift from a father to his son is not taxable.

After the shares are transferred, the cost at which your father bought them will be treated as your cost. When you sell them, the holding period will be considered from the date on which they were purchased to the selling date. As these shares were bought 10 years ago, they are a long-term capital asset, so no tax will be levied on the profit from their sale.