Can I pay income tax after 31 March of a financial year? If yes, will I have to pay penalty?
—Prashant
There is often confusion between last date for paying income tax and that for filing tax return. Tax return has to be filed (for most taxpayers) by 30 June of the next financial year. You can pay the tax even after 31 March or file tax return after 30 June, but with a late fee and penalty, if applicable. For instance, if your TDS and advance tax for your income in 2006-7 exceeds or equals your tax liability for the year, you will not have to pay a penalty for late filing, except a nominal late fee. However, if your tax liability exceeds the tax paid by you before 31 March 2007, and the delay in making the full tax payment isn’t beyond 31 March 2008 then you will be charged only a late fee. If your tax payment is delayed beyond 31 March 2008, you will also be charged interest on the outstanding amount. For consultants and those with multiple sources of income, the provision to pay advance tax helps address possibilities of such delays. They are supposed to pay 30% of the estimated tax by 15 September, 60% by 15 December and the balance by 15 March. Total tax should be paid by 31 March to avoid payment of interest under Section 234 of the Income Tax Act, 1961.
Can I avail tax benefit on the fees I pay for my brother’s college education?
—Suresh Kumar
You cannot avail any tax benefits for the fees you are paying for your brother’s education. According to Section 80C of the Income Tax Act, 1961, tuition fees (excluding development fees, donations or other payments of similar nature) paid to a recognised university, college, school or other educational institutions within India for full-time education of any two children of an individual qualifies for deduction, up to an overall limit of Rs 1 lakh. However, there is no provision for the expenditure incurred on a sibling’s education.
I have invested Rs 10,000 in LIC’s Ulip plan Money Plus. Is the investment eligible for tax deduction?
—Madan Sahai
Yes, your investment of Rs 10,000 in LIC’s Money Plus Ulip is eligible for deduction from your gross total income under Section 80 C. The maximum amount that can be claimed under this section along with other tax saving schemes is Rs 1 lakh a year.
Are investments in mutual funds eligible for deduction under Section 80C? Does this differ for investments made in lump sums and through systematic investment plans (SIPs)?
—Manish Kaushal
Investments in all mutual fund schemes do not qualify for tax deduction under Section 80C. Only equitylinked saving schemes (ELSS), also known as tax plans, qualify for this deduction. Investments in these tax saving schemes may be made both in lump sum and through SIPs (monthly, quarterly or annually) options. Before you invest, it is advisable to check whether the fund is eligible for tax deduction or not.
I claimed LTA last year and wish to do the same for this year. Do I get tax benefits in both years?
—Jagat Pal
A taxpayer can claim exemption for leave travel concession for any two journeys in a block consisting of four calendar years. The first block started in 1986-89. So we are currently in the sixth block of 2006-2009. You have already claimed one LTA for this block and can claim the second one in any year from 2007-2009. Also, if an individual is not able to claim LTC in a particular block of calendar years, he can claim the exemption in the first year of the next block for only one journey of the previous block. So, a maximum of only one journey can be carried forward and that has to be claimed in the following calendar year unless the period is otherwise extended.
How can one collect tax refund if it has not come automatically from the income tax office?
—Sai Krishna
In case your income tax refund does not come automatically from the income tax office you can either personally visit your assessing officer with a copy of the acknowledgement of the return or write to them enclosing the details. If your refund still remains pending then you can take up the issue with the ombudsman who will help you in getting your refund. In your income tax return, mention the details of your bank account like the account number, bank branch and the MICR code. You are likely to get your refund in time by way of direct credit in your bank account.
My HRA is Rs 24,000 and salary is Rs 1.58 lakh a month. I live in Delhi and pay a monthly rent of Rs 30,000. How much of my HRA is taxable?
—Ramesh Krishnan
If you pay rent, you are eligible for exemption under Section 10(13A). The HRA exemption in your case will be calculated as the least of the following three:
• 50% of basic = Rs 9,48,000
• HRA received = Rs 2,88,000
• Rent paid minus 10% salary = Rs 1,70,400 (Rs 3,60,000 - Rs 1,89,600)
The least of the above calculations is Rs 1,70,400. The balance HRA of Rs 1,89,600 will be taxable in your hands. You also need to retain the rent receipts for claiming the benefit.
Can I write off the cost of my personal digital assistant (PDA) as a business expense to reduce my tax?
—Ajay Sinha
PDA shall be treated as a business asset. As a business asset, you may not be able write it off in one year but you can certainly claim depreciation on it which is a chargeable expense. For income tax purposes such assets are classified under the head of computers and are eligible for depreciation at the rate of 60% if used for more than six months in a financial year and 30% depreciation if used for less than six months. The depreciation can be claimed in the following years too on the depeciated value.
How much leave can be encashed without paying any tax.What is more beneficial— encashing leave during service or at the time of retirement?
—Chetan Saxena
No income tax exemption is available for encashment of earned leave during the service period. The amount received by you as encashment of earned leave shall be taxed as salary income in your hands. Encashment of earned leave at the time of retirement is exempt from tax subject to certain conditions and up to a maximum amount of Rs 3 lakh. The total amount of entitlement is worked out based on the 30 days earned leave for every one year of completed service ignoring any part of the year. The average salary drawn during the last 10 months of service before retirement is taken into account for calculating the amount of encashment. Any leave encashed during the service period is reduced from this amount.
