What is the difference between advance tax and tax deducted at source (TDS)? Do I need to pay tax if TDS has already been paid from my income?
-Chetan Sharma
Advance tax is payable when the estimated tax liability exceeds Rs 5,000. In order to ease cash flow, payment of tax is made in instalments.
By 15 September, you must pay 30% of the total estimated tax, 60% by 15 December and 100% by 15 March every year.
The onus of paying advance tax is on an individual. On the other hand, TDS is a method of collection of tax from individuals at the time of payment. The responsibility for deducting and paying tax at source lies with the person making the payment.
TDS does not mean the end of your tax liability. In some cases the TDS is only 10%. If your income is in the 30% tax slab, you are required to pay more tax. Also, you need to file your tax return even if the TDS has been paid.
I invested Rs 50,000 in a mutual fund in May 2007 and sold in September 2007. I made a profit of Rs 8,000. What is my tax liability?
-Gaurav Kumar
Your tax liability depends on the type of mutual fund you invest in. If you had opted for an equity fund, your profits in this case will be considered short-term capital gains; short-term is because you held the units for less than a year.
You will have to pay short-term capital gains tax of 10%. If your investment was in a debt fund, the profit will be clubbed with your income for the year and taxed at the rate applicable to your total income. (An equity fund is any fund with an exposure of 65% or more to Indian equities.)
I have started a business in partnership with my brother. What will be the rate of tax on the profit?
-Mukand Pal
It largely depends on what sort of company you have formed. If it is a partnership firm (with a partnership deed that states the nature of business and the exact share of profits), the net profits declared will be taxed at 30%, plus 10% surcharge and an education cess of 3% for the financial year 2007-8.
If, however, there’s no partnership deed and no decision regarding profit-sharing, the company will be considered an association of persons, and will then be taxed at the maximum marginal rate of 33.66% (subject to more conditions).
I will be shifting to the US permanently. When should I file my return for the current financial year?
-Usha Khanna
As you are leaving India permanently, you should file your income tax return before leaving. According to Section 174 of the Income Tax Act, any person leaving India with no intention of returning or who plans to stay away for a long time, is required to file his return for the total income earned during the financial year up to the probable date of his departure.
This income is taxable in the same financial year. You can file the return in December 2007 for the period April 2007 to December 2007 at the advance tax rates applicable for 2007-8. You are eligible for tax cuts on investments that allow deductions.
I am a housewife. I inherited some money from my mother, and invested this amount in fixed deposits (FDs) and mutual funds. I will receive approximately Rs 50,000 as interest on the FDs alone, and have already started receiving dividend on mutual funds. Should I file my return?
-Shilpa Garg
You do not need to file your return. With effect from financial year 2007-8, income up to Rs 1.45 lakh is exempt in the hands of women.
Further, your income includes interest from fixed deposits and dividend income. Dividend income is exempt in the hands of the recipient as per Income Tax Act. Your total estimated income from fixed deposits is Rs 50,000, which is within the limit.
I was recently transferred to Bangalore. I was given a transfer allowance of Rs 50,000 and a daily allowance of Rs 750 for 10 days. My actual daily expense was about Rs 500. Out of the transfer allowance, I spent more than Rs 50,000 to shift my possessions and pay the packers and movers. What is my tax liability on these allowances?
-Rathnesh Kumar
Transfer allowance granted to an employee to meet the cost of travel, including any amount paid in connection with transfer, packing and transportation of personal effects on such transfer, is exempt from income tax to the extent it is actually spent to meet these expenses.
As you have spent the total amount of Rs 50,000 provided by your employer for shifting, it is exempt from tax. Also, daily allowance paid to meet ordinary daily expenses incurred by an employee during transfer period till accommodation is provided, is exempt to the extent it is actually spent. In your case, the balance amount of Rs 2,500 is taxable.
I own an apartment in Gurgaon and was living in it till recently. I have now moved to Noida and am staying in a company-provided accommodation. Can I get vacancy allowance for my Gurgaon apartment? If my dependent parents live in that apartment, can I claim that the property is self-occupied, even if I am residing in Noida?
-Ram P Agarwal
The Income Tax Act provides relief in cases where an individual cannot stay in his own house because of employment reasons.
In your case, since you have to stay in your official residence at Noida as part of your official duty, your Gurgaon flat is eligible for vacancy allowance. This is assuming that you do not rent the house out and no other benefit is derived from it.
If your dependent parents live in the Gurgaon flat, and provided that this is the only flat you own, it will be treated as selfoccupied and its annual value shall be nil.
