Resolving financial dilemmas

Team Money Today        Print Edition: November 2014
Experts answer your personal finance queries
(Photo: Reuters)

TAXATION

Q-I deposit Rs 60,000 in PPF annually and am planning to open another account in my son's name and contribute Rs 40,000 per annum to it. Can I claim tax exemption on both accounts? Also, can I invest more than Rs 1 lakh in PPF per annum, even though the exemption is only up to Rs 1 lakh? -N Sharma, Pune

A- No, you cannot claim the 80C tax deduction under the tax laws by investing in your son's name. Also, please note that the investment limit in PPF has been raised from Rs 1 lakh to Rs 1.5 lakh for the current financial year. Similarly, deduction limit under Section 80 C has been enhanced from Rs 1 lakh to Rs 1.5 lakh.

Q- I had donated Rs 20,000 to an NGO in June last year, and this was exempted under Section 80G. However, my chartered accountant did not take this into account while filing my return. Please let me know if there is a provision for filing a revised income tax return for the current assessment year.Priyesh Jayaram, Chennai

A- Yes, you can revise the return and claim the donation. The return can be revised within two years from the end of financial year if the original return was filed within due date. In case the original return filed by you have been processed by the Income Tax department, then the return cannot be revised.

Q- I am 27 years old and am planning to buy a flat worth Rs 50 lakh in Mumbai. My dad is a senior citizen and plans to fund the purchase by selling his apartment at Virar. I want to take a home loan too. If he sells his flat and puts his money in a fixed deposit till the property is finalised, will it attract any tax? Will this transaction be treated as an income for me? -Sanjay Sharma, Mumbai

A- Yes, your father will attract tax on selling the flat and keeping the money in fixed deposits. Assuming your father is selling the property after holding for more than three years, he should invest the capital gain amount with a bank in a capital gain investment scheme till he invest in the new house purchase. He should become co-owner in the new house with you to avoid capital gains tax. In case he gives money and does not become the co-owner in your new house than he need to pay tax at 20% on capital gain on selling the Virar flat. The amount given in blood relation is tax free as per tax laws hence it will not be treated as your income.

Q- I had taken a home loan from a private lender in February 2011 and am availing of the tax benefit on the interest. I want to refinance my loan from SBI for the balance principal of about Rs 2.1 lakh and want an additional Rs 7 lakh for renovation. What will be the tax deduction for the total interest payment on the new home loan of Rs 28 lakh? How many times can one opt for loan refinancing for a given property without affecting the tax deduction on interest for new home loans? -Md Saleem Zahid, Chennai

A- The tax deduction for interest on home loan depends on the purpose of loan. In case the loan is for renovation of house property, it is Rs 30,000 per annum. It is Rs 2 lakh if the loan is for purchase or construction of self-occupied house. An additional Rs 10,000 is allowed under section 80EE if the loan is being taken for the first house and you do not own any house in your name and the loan amount is below Rs 25 lakh, the cost of the house below Rs 40 lakh and date of sanction is on or after 1 April 2013. There is no limit for deduction on interest on home loan in case property is on rent. Also, there is no limit prescribed in tax laws for re-financing of home loan.

Q- In 2005, my ex-wife and I had purchased a flat, which is held jointly. I have repaid the loan. We got divorced in December 2013 and she transferred her property rights to me. The court has also informed the society about our divorce as it was mentioned in the consent terms. I have got the power of attorney from her and a no-objection certificate to remove her name. What is the procedure for removing her name from the society's records and other documents? Do I have to pay the stamp duty and registration charges again? -Shiv Sharma, Mumbai

A- If your ex-wife has given a No Objection Certificate and the power of attorney is received, then at the initial level it should be legalised by registering with the sub-registrar office. This document itself is sufficient to remove the ex-wife's name from the society's record. For removing her name from the society's record, you need to pay the stamp duty for the same. However, the duty is not going to be that of a regular purchase.

LOANS

Q- I and my wife have taken a loan of Rs 15 lakh against our property worth about Rs 70 lakh and are paying an EMI of Rs 25,000. We have a delayed track record of payment and have not filed our IT returns for three years. We are looking at taking a top-up loan of Rs 10 lakh as we need funds to scale up our business and diversify. Is there a possibility of getting a loan?
-Pawan Singh, e-mail

A- Financial institutions consider both borrowers' income profile as well as their repayment behaviour across earlier debt in deciding their creditworthiness. All debt, with past repayments, is recorded on your credit report: a critical tool used by banks in credit underwriting. If you pay your EMIs on time and as agreed while staying within the agreed credit limits and making necessary monthly repayments in full, your report will reflect this. Likewise, your credit history is adversely impacted by any delays or defaults on repayments. Most institutions also provide best credit deals to applicants with better credit history and higher credit scores. Lending norms of banks generally differ on few parameters for salaried or self-employed borrowers and personal or business end use. Credit appraisal processes shall also differ across lending organisations, based on their portfolio risk appetite and target customer profile. Thus, while delayed track record of payments and unavailability of tax returns may not be viewed favourably while making lending decisions, some organisations may consider approving your loan based on other factors like business model, economic outlook, etc.

INSURANCE

Q - I work in the private sector and my annual medical reimbursement is Rs 15,000 per annum. Apart from this, I also have a medical cover of Rs 2 lakh for myself and my dependants. Should I take a separate health insurance? If yes, what are the factors to consider before buying additional cover? I am the eldest member of the family at 37, and we have a clean medical record. Do you think we can buy a separate health cover as a top-up to our existing cover given by the employer? -Vyom Sharma, e-mail

A- You are thinking in the right direction by considering additional cover, as inadequate coverage is more harmful than no coverage. It gives one a false sense of security. For a family, coverage of Rs 2 lakh is inadequate. Hence, you should buy a high deductible plan that will allow you to enhance your cover as per you and your family's needs at a lower cost. Besides giving additional coverage, it will also give you the benefit of continuous coverage, if you choose to switch jobs. Before buying any plan you should review the benefits, waiting periods, exclusions and features of the chosen plan. Last but not the least, please remember to disclose all medical condition while filling up the proposal form. This will help in a hassle-free claims experience.

Q I am 32 years old and am HIV positive. I am in good health and currently on medication at the YRG CARE, Chennai. My CD4 count is around 800. I have read about insurance coverage for HIV patients. Could you let me know the details of such plans?-Vikram Kannan, Chennai

A- Currently, there aren't many health insurance plans available in the Indian market that cover HIV positive population. This can be attributed mainly to lack of consolidated data on various communicable and non- communicable diseases. We would recommend that you carefully check the clauses in the policy before buying any plan as these plans come with certain terms and conditions.

PLANNING

Q- I opened a term deposit account with a private bank and at the end of the term, the amount was paid without the TDS. There was a shortfall of a few hundred rupees, and when I questioned it, the bank said that since it had paid tax every year during the tenure of the deposit and, hence, the maturity value was reduced by this amount. Is the bank right in doing so? -Mohan Nath, Delhi

A- If the interest of the term deposit exceeds Rs 10,000 in a financial year the bank needs to deduct 10% tax at source before crediting the interest to the account. This can be verified by checking the 26AS statement on the Income Tax website. This is required to be done as per tax laws.


DO YOU HAVE QUERIES ON TAX, INSURANCE, INVESTMENTS?
Anil Rego, CEO, Right Horizons, has tackled financial planning; Antony Jacob, CEO, Apollo Munich Health Insurance has answered insurance
queries; Mohan Jayaraman, MD, Experian Credit Information Company takes on loan-related queries & Sudhir Kaushik, Co-founder and CFO,
Taxspanner.com, has provided tax solutions. Log on to moneytoday.in to submit your questions.

 

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