My wife works as a consultant in an IT firm and is paid a fee of Rs 1.8 lakh a year, which is non-taxable. However, the company deducts 10% tax at source (TDS). How can she avoid this? She has never filed her returns because her income does not exceed the threshold limit. Can she claim the TDS for the previous years?
— K.S. Rajan, Bengaluru
If the aggregate professional fee credited or paid during a financial year is more than Rs 20,000, then tax has to be deducted at source by the payer, in this case, the IT firm. To avoid TDS, you can fill up Form No. 13 and forward it to the assessing officer, who will provide a certificate authorising the payer not to deduct tax. This no deduction certificate will be issued to the payer with advice to you. Only after getting the certificate will the IT firm give the full payment and your wife will not have to wait for the tax refund. She can also claim the TDS deducted in previous years by filing the returns for those years. She can file belated tax returns for the financial years 2007-8 and 2008-9 till 31 March 2010.
My previous employer gave me a bonus in April this year on the condition that I remain with the company till March 2010. The bonus was paid after deducting tax at the rate applicable to me. However, I resigned in September and the company demanded the full bonus from me. I was asked to collect the tax from the Income Tax Department. Is the company justified in doing so? How can I claim the deducted tax?
— Rajeshkumar Gajera, Jamnagar
The employer is justified in demanding the entire bonus as the company would have deposited the TDS with the Income Tax Department. You can verify this amount through your annual tax statement or Form 16. At the time of filing your incometax return, you can claim the refund for the TDS after adjusting it against any other income earned in the financial year 2009-10. To ensure a faster refund, file your return electronically. Also, mention bank details, including the nine-digit MICR code number on the cheque, so that the refund is credited directly to your bank account.
I was divorced recently. As part of the divorce settlement, my former husband paid me a compensation of Rs 7 lakh. Do I need to pay tax on this amount? Under which head does the compensation amount have to be shown in my tax return? My annual income is Rs 3.5 lakh.
— S. Pritha, Kochi
The compensation amount will be included in your total income under the head ‘Income from other sources’. It will be taxable as per the applicable tax rates based on your gross total income, which comes to Rs 10.5 lakh. You can claim deduction up to Rs 1 lakh under Section 80C by investing in instruments such as the Public Provident Fund (PPF), National Savings Certificate (NSC), life insurance policies, five-year fixed deposits or equity-linked savings schemes.
My mother wants to gift me a house in Delhi. Will this be taxable for either of us? Is the registration fee lesser in some states, including Delhi, if the property is registered in the name of a woman? Will the tax treatment be different if the house is gifted to my wife or to both of us?
— Vishal Garg, Mangalore
A house gifted by a parent is exempt from income tax. If the property is registered in the name of a woman, the registration fee is 6%, compared with 8% otherwise. However, if the house is gifted to a daughter-in-law (your wife), any income from the house (rentals or capital appreciation) would be clubbed with the income of the mother-in-law.
My wife owns a plot that was gifted to her by her father. I now plan to take a loan to build a house on it. Will I be eligible for home loan benefits? Will I be entitled to tax benefits if I take the loan jointly with my wife?
— Krishna Pathak, Bhopal
You will not be eligible for home loan benefits irrespective of whether you take the home loan individually or jointly with your wife. For claiming the home loan benefits of interest or repayment, you need to be the owner/co-owner of the house. As the plot is in the name of your wife, she will be the exclusive owner of the house and only she can claim interest/repayment benefits to the extent of her share in the loan repayment. If you want to claim 50% of home loan benefits, you should first purchase a 50% share of the plot from your wife and become a coowner. Only then should you apply for the loan.
I took a home loan to buy a house five years ago and availed of tax benefits for the interest paid under Section 24. I am now planning to take a loan to buy another house. The interest outgo will be about Rs 5 lakh a year and the monthly instalments will start from April 2010. Will I be eligible for the home loan benefits if I live in the new house?
— Sanjay, Pune
You can claim the home loan interest deduction benefit up to Rs 1.5 lakh if the house is for selfoccupation. In addition, you can claim up to Rs 1 lakh as deduction under Section 80C for the principal amount paid during the financial year. You must take possession of the new house before 31 March 2010 to claim the interest deduction for the current financial year. However, to avail of tax benefits, you can only show one house as being occupied by you.
I bought a unit-linked pension plan four years ago, but now realise that it was not suited to my financial situation or risk appetite. Instead of gaining, I have lost money. I have paid the premium for three years. Can I foreclose the plan now? Will there be any deduction considering that the plan was originally for 15 years?
— G. Ravindra Nath, Visakhapatnam
The surrender charge depends on the policy agreement with the insurance company. It is not prudent to foreclose a unit-linked plan after three years as the charges in the initial years are higher and, hence, the invested surplus for growth is less. This is one of the reasons you seem to have lost money in the first three years. In case you decide to surrender the policy now, the redemption proceeds will be fully taxable. Under Section 10(23AAB), tax benefit is available only on the commuted amount of the pension corpus at the time of vesting.
My monthly taxable income is Rs 30,000. I shall be going on a twomonth deputation to Fiji, where I shall earn Rs 50,000 a month and pay tax at 31%. How will this reflect in my tax liability? Will the tax paid in Fiji be adjusted against the tax liability on my total income of Rs 3 lakh (for 10 months)?
— Manoj Sharma, Vadodara
Since your stay in India will be for more than 182 days in the financial year, your status will be considered as that of a ‘resident’. Hence, your global income, including the two months’ income earned in Fiji, will be taxable in India. Your total taxable salary income will be Rs 4 lakh. However, while filing your return, you can claim relief for the tax that you pay in Fiji.
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