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How do I claim my income tax refund?

January 21, 2009

I have recently sold a property after renovating it. Will the cost of renovation be added to its total cost when the capital gain on its sale is calculated?
- Ramesh Dalal

Yes, the cost of renovation will be added to the total cost while calculating the capital gains. Only those expenses which have actually been incurred in making additions and improvements to the house shall be taken as the cost of improvement. This will, however, exclude any expenditure on maintaining the property.

The total cost of improvement is indexed according to the rates for the year in which the renovation work was completed. In case the renovation was carried out in different financial years, the indexation shall be applied accordingly for all the years and the total cost of improvement will be derived by adding all of them.

I have not yet received my income-tax refund. How can I claim it?
- Jitesh Parekh

If you haven't received your tax refund as yet, you can either visit your assessing officer with a copy of the acknowledgement of your income-tax return or write to the income-tax office enclosing the details. If you do not get the refund despite this, you can take up the issue with the ombudsman. In future, mention the details of your bank account such as the account number, bank branch and MICR code in your return. The refund will be credited directly to your bank account.

I want to gift some money to my children and then invest this in their names in a bank fixed deposit. What will be the tax implication on the income earned on the FD? Is there a process to show it as a gift so that my tax liability comes down?
- Nagesh Rao

Gifts to certain relatives, including adult children, are exempt from gift tax. If your children are over 18 years old and not dependent on you, the interest income earned on the fixed deposits shall be taxable in their hands. There is no upper limit on the amount that you can gift to your children and you are not required to mention it in your incometax return. However, you can mention it in the return for the financial year during which you have gifted it as a note in your computation of income sheet. As documentary evidence, draw up a gift deed on a stamp paper and keep it in your records.

I am an interior designer and have just started my own business. I want to know if it is compulsory for me to maintain books of accounts. If yes, which books are mandatory?
- Anita Kumari

Books of Accounts
Specific self-employed professionals need to maintain books of accounts such as a cash book, journal, ledger, etc, if their gross receipts exceed Rs 1.5 lakh a year.

According to the Income Tax Act, it is mandatory for specified professionals to maintain books of accounts if their gross receipts from the profession exceed Rs 1.5 lakh in any one of the three years immediately preceding the current year. The specified professions include law, medicine, architecture, engineering, accountancy, technical consultancy, interior decoration, films, company secretaryship and information technology. For a new set-up, if the annual gross receipts are likely to exceed Rs 1.5 lakh, books are required to be maintained.

For professionals, the books prescribed by Rule 6F include cash book, journal, ledger, carbon copies of bills issued and original bills of expenses incurred. These have to be retained for six years and must be stored at the place where the profession is being practised. If the books are not maintained, a penalty of Rs 25,000 can be imposed under Section 271A.

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