I opted for the dividend reinvestment plan of an ELSS mutual fund. My employer is not considering the units bought by the reinvested dividend for tax benefit. Is this correct?
Although there is no specific clause stating that dividend reinvested in an equity-linked savings scheme will get Section 80C tax benefit, it is only logical to assume that the reinvested dividend is eligible for income tax deduction.
Under Section 80C, the investment does not necessarily have to come from the income chargeable to tax. Look at it this way. Had you opted for the dividend payout option, received the dividend and then invested that money in the same scheme, you would have got the income tax benefit.
So why should the situation be treated any differently now? The reinvested units are also subject to the three-year lock-in applicable to ELSS investments. Your employer is not justified in denying you the tax benefit.
I have taken two housing loans to buy two separate houses and have rented them out. Can I claim any tax benefits? I live in a rented house. Am I entitled to house rent allowance exemption?
— RN Kumar
You are eligible for tax deduction on the interest paid on both the loans. In case of a self-occupied house, the maximum amount of interest which qualifies for deduction is Rs 1.5 lakh a year.
But in case a property is rented and the rent is included in the gross total income of the assessee, the entire amount of interest paid qualifies for deduction.
Therefore, you can claim the entire interest paid on the two loans. The repayment of the principal amount of loan qualifies for deduction only if the house is self-occupied.
So you are not eligible for any tax benefits on that count. However, the house rent allowance you receive from your employer is eligible for deduction under Section 10 (13A) of the Income Tax Act, 1961.
I sold a flat within two years of purchase. What are the tax implications and is there a way to save the capital gains tax arising from the sale?
Profit from sale of property is treated as long-term capital gains if the property is held for over three years. Since you sold the flat within two years, the profits would be treated as short-term capital gains. There is no provision for reinvesting the proceeds to reduce short-term capital gains. The gains would be added to your income for the year of sale and taxed at the applicable rate.
What is the tax treatment of profits from global funds?
— Mohan Ram
Many of the global funds available are essentially feeder funds that in turn invest in the international funds of their parent body. In such cases, the long-term gains are taxable at a flat rate of 10% (or 20% after indexation).
The short-term gains are added to your income and will be taxed according to the applicable rates. However, some global funds invest 65% of their corpus in domestic equity shares and the balance in international markets. These funds are categorised as equity-oriented funds and are eligible for tax benefits enjoyed by other equity funds.
Short-term gains are taxed at 10% and long-term gains are tax free. You need to examine the investment structure of any global fund for determining the tax impact.
My income tax return was scrutinised. Despite all documents being in order, the assessing officer arbitrarily added some amount in my income and asked me to pay tax and penalty on it. What recourse do I have?
— Ben Mathew
If you are convinced that the addition made to your income by the assessing officer is not justified, you can file an appeal. This should be done on Form 35 within 30 days of the receipt of the order of the income tax officer. You can download the form from the official website of the income tax department. Submit all documents relating to the case and the grounds for the appeal along with the form.
Can short-term capital loss be set off against any other income in the same year?
— Madhup Raj
Short-term capital loss can only be adjusted against income under the head capital gains, whether it arises on sale or transfer of a short-term asset or a long-term capital asset, in the same financial year. In case the loss cannot be wholly set off, it can be carried forward to the following assessment year and so on. The loss can be carried forward for a maximum of eight assessment years immediately succeeding the assessment year for which the loss was first computed.
I changed my job recently and the new company has given me a joining bonus. How do I file my return since I will have received my salary from two different employers? I have also received the basic tax exemption from both companies.
— Rajkumar Bharti
First of all you need to collect a salary-cum-tax deduction certificate from both your employers. Employers will issue the certificates in Form 16, which will have the complete details of salary earned, tax deducted at source and the deposit of income tax, giving the details of the bank and branch where the tax was deposited.
Since both companies have allowed you the basic exemption while calculating your tax liability, in all probability you may have to pay self-assessment tax while filing your income tax return. For the purpose of filing of return, you also have to include income from other sources — bank interest, capital gains, income from rent, etc.
The joining bonus is fully taxable. After collecting all the relevant information, you have to file your tax return in the form applicable to you according to the heads under which your income falls.
I had paid self-assessment tax for financial year 2005-6 and filed the return with the challan. I have got a demand in which credit for self assessment tax is not given. I do not have a copy of the challan. How do I prove to the department that I have actually paid the tax?
— Pratap Suri
If you do not have a copy of the challan submitted with the return, you can always get a duplicate from the bank through which you deposited the challan.
The bank will ask you to furnish the date of deposit of tax. If you deposited the payment by cheque, you can give the cheque number and date, through which the bank can track the payment.
If the payment was deposited in cash, you will have a cash deposit slip, a copy of which can be given to the bank. The bank will charge a nominal fee for issue of a duplicate receipt. Once you have the receipt, you can produce the same to your assessing officer and get the demand reversed.
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