I had invested in the National Savings Certificates (NSC), which matured in February this year. Can I claim deduction under Section 80C for the interest earned?
- Devi Dutt
The investment made by an individual in an NSC qualifies for deduction under Section 80C. The maximum amount that can be claimed as deduction under this section is Rs 1 lakh. For the first five years, the interest that is earned is credited to the investor's account. This accumulated interest is treated as an investment in the NSC and, hence, it qualifies for exemption under Section 80C.
In the sixth year, which is also the last, the entire amount is handed over to the investor, including the interest earned for the final year. As the interest for the last year is paid to the investor and is not reinvested, one cannot claim any deduction for the same.
What are the rules regarding the losses incurred while trading in shares?
- Ramesh Jain
The gains from the sale of shares are taxable under the head 'capital gains'. If the shares are retained for less than a year, the gain or loss is classified as short-term gain/loss. If you hold the shares for one year or longer, the gain or loss is classified as longterm gain/loss. Short-term capital loss can be set off against both long-term and short-term capital gains, whereas long-term loss can be set off only against long-term gain.
In case a capital loss is not set off in the same financial year, it can be carried forward up to eight assessment years and set off against future gains. Long-term and short-term capital losses are carried forward separately.
I will be retiring this year. I had encashed my earned leave several times during my career. How will the final sum payable to me be calculated?
- Kumar Raja
The earned leave that is encashed during service is taxable as salary income in the hands of the employee, but the encashment of earned leave at retirement is eligible for a tax concession. When you retire, the earned leave is calculated by taking 30 days' of this leave for every year of completed service, multiplied by the total service period. The average salary for the last 10 months is considered for calculation. The number of days of encashed leave during the service period is reduced from the final service period. For instance, if a person has worked for 20 years, he can encash leave for 600 days (30 days for every year x 20 years). If he has already encashed 200 days during his service period, he can encash only 400 days of the earned leave on retirement. The amount calculated as above is taxfree up to a maximum of Rs 3 lakh.
I have opened a bank account in my wife's name and regularly withdraw money from this account to make investments. How will any income earned from these investments be taxed? Which form should I use to file my wife's return?
- Bhuvan Singh
If your wife has no other source of income, then the investments made from her account will be clubbed with your income and will be taxable in your hands under Section 64. No separate form will be required to file your wife's return as her income will be added to yours.
So, if your wife makes a profit in share trading, the income will be clubbed with yours under the head 'capital gains' in the return that you file. When she receives any dividend from these shares, the amount will be added to the dividend received by you.
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