There is a change in the STT provision from the current financial year as per the latest budget. Will it be treated as tax paid or as an expense?
The change in the treatment of securities transaction tax (STT) is only for investors whose income from share trading is taxed under the head of “business income”. The change has come into effect from 1 April 2008. Earlier, for a person trading in shares, the tax rebate was allowed on account of STT paid from the total tax. After the amendment, the entire STT payment will be treated as expenditure against the income from trading of shares. However, for investors who claim their profit as capital gains, there is no such provision. The STT paid won’t be treated as an expenditure and there will be no tax rebate.
I have been provided accommodation by the company I work for. I am planning to take a home loan to buy a house.What will be the tax exemption if I rent the house or occupy it myself?
—Raj Kumar Jha
You will be eligible for tax deduction in both the cases, whether you occupy the house yourself or give it on rent.
The only difference is that if after buying a house on loan you give it on rent, the full amount of interest paid on the loan is eligible for deduction from the gross rent received. However, if you live in the house yourself, you can claim deduction for a maximum interest of Rs 1.5 lakh. This deduction can be set off against income under other heads.
In addition to this, the maximum amount allowed for deduction under Section 80C for the repayment of the principal is Rs 1 lakh. You can avail of this deduction whether you are living in the house or have rented it out.
I want to take an education loan for pursuing an MBA course.Will the repayment of loan qualify for an income-tax deduction?
—Jai Prakash Gupta
Yes, the repayment of interest on education loan for higher studies qualifies for deduction under Section 80E of the Income Tax Act. Higher education is defined as full-time studies for any graduate or post-graduate course in medicine, engineering or management, or any post-graduate course in applied sciences or pure sciences, including mathematics and statistics. However, no deduction is allowed for the repayment of principal. The entire amount of interest, without any limit, is allowed as deduction, provided it is paid from the taxable income of the assessee. The period of deduction cannot exceed eight assessment years, commencing from the year in which the first repayment is made.
My family comprises myself, my wife and son. Can I form an HUF with just three members?
You can form a Hindu undivided family (HUF) in your own name, where you would be the karta, and your wife and son would be the coparceners (a person who shares equally with others in an inheritance). Your wife cannot be a karta, who must mandatorily be a male. Also, your income and the income of the HUF cannot be clubbed together and will be taxed separately.
I could not get a home loan from a bank, so I took a loan from my brother-in-law. I am paying an interest to him on this loan.Am I eligible to claim the home loan-related tax benefits available to those who borrow from a bank?
As far as interest payment is concerned, you can claim the same tax benefits as are available to any other home loan customer. In case of home loans taken from family members, deduction of the interest paid is allowed under Section 24(b). However, you will have to genuinely pay the interest to your brother-inlaw and he will have to give you a certificate saying that he has received interest from you on the loan. This certificate must be submitted along with the income-tax return.
However, you cannot avail of deduction under Section 80C on repayment of principal of the home loan from family members as deduction under this section is allowed only if the loan is taken from a financial institution approved by the government.
My wife is pursuing a full-time B.Ed course. I have paid Rs 38,000 as tuition fees.Am I eligible for any tax deduction?
No, you cannot claim any tax deduction for the fee paid. Deductions are allowed for payment of tuition fees (excluding development fees, donations or other payments of similar nature) under Section 80C only for the full-time education of a maximum of two children of the assessee.
My father was treated for cancer at a private hospital. Can I claim tax deduction for the expenses incurred on his treatment? Is the entire amount spent on treatment deductible from the taxable income?
You can claim deduction under Section 80DDB for the treatment of your dependent father up to the expenditure actually incurred or Rs 40,000, whichever is less. If your father is a senior citizen (above 65 years), you will be allowed a deduction of Rs 60,000. For claiming the deduction, you will have to submit Form 10-I signed by a cancer specialist working in a government hospital.
What is the maximum amount that I can accept as a gift from relatives without paying any tax?
You can receive up to Rs 50,000 per transaction as a gift from your relatives or friends without paying any tax. However, there is no monetary limit on gifts received from certain relatives such as your spouse, your brother or sister, your spouse’s brother or sister, any lineal ascendants or descendants, or spouses of the relatives mentioned above. Apart from this, there is no limit on gifts received on certain occasions, such as a wedding.
I want to borrow Rs 1 lakh from a friend. Will I have to pay tax?
You don’t need to pay any tax on the money borrowed from your friend, provided the entire transaction is carried out through proper banking channels, such as a cheque, bank draft or online transfer. You will have to maintain a proper record of the amount borrowed and its repayment. The interest paid on the borrowed money will not be allowed as an expense, that is, it cannot be adjusted against any other source of income.