After my promotion last month, I have started getting a fixed entertainment allowance. Is it taxable?
—Devlina Nair
Entertainment allowance is fully taxable for all private sector employees. However, government employees are eligible for exemption if the allowance is included in the gross salary. Thereafter, the deduction under Section 16(ii) is available to the extent of the least of the following: (a) actual entertainment allowance received during the year; (b) 20% of the gross salary, exclusive of other allowances, benefits or perks, or (c) Rs 5,000.
{mosimage}When my company shifted me to another city, it paid me for 15 days of hotel stay. I extended the stay as I couldn’t find a house. What’s the taxability for the extra amount spent?
—Naresh Gadgil
If an employee is transferred, he can be provided hotel accommodation for up to 15 days. If the period of stay in the hotel exceeds 15 days, 24% of the payable salary (for the period during which the hotel stay is provided), or the actual amount paid to the hotel is considered to be the value of accommodation. It is added to the salary of the employee as a perquisite value and taxed accordingly.
Companies also provide a transfer allowance to employees to meet the cost of travel, including any amount paid in connection with the transfer, packing and transportation of personal effects. This transfer allowance is exempt from tax to the extent it is actually spent on these. The same is true for the daily allowance given to meet the ordinary, everyday expenses.
I sold some shares last year after holding them for three years and made a profit of Rs 8,000. I bought more shares in 2008 and sold all of them within six months. While I made gains on some, I also suffered losses. What is my taxability? Can I claim the securities transaction tax (STT) that has been deducted?
—Rakesh Ranjan
As you sold the shares after three years, the profit will be termed as long-term capital gain and will be exempt from tax. The other shares were sold by you within the same year, so the gain or loss will be short-term. Short-term gain is taxable at 15%, plus 3% cess and surcharge, as applicable. You can offset the short-term capital loss against both longterm and short-term capital gain. The loss that cannot be offset in the same year can be carried forward to a maximum of eight assessment years immediately succeeding the assessment year for which the loss was first computed. The STT paid cannot be claimed as an expense.
I want to invest in a deposit scheme of a public sector company. How will the tax be deducted?
—Devinder Mishra
Tax is deducted at source for deposits with any public sector company. The company will deduct tax at a rate of 10.3% on the interest paid if the total interest on your aggregate deposit exceeds Rs 5,000 in a financial year.
I take tuitions at home and earn Rs 20,000 a month. I receive all the money in cash. Do I need to file my return?
—Savita Negi
Yes, you will have to file your return as your income is more than Rs 1.8 lakh a year, which is the taxable limit for women. You will need to invest about Rs 60,000 in tax-saving instruments, such as the Public Provident Fund or an equitylinked saving scheme, if you want to avoid paying tax. You should open a savings bank account to deposit your income so that you have proof of your transactions.
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