REPLY :  

Loss of one business entity cannot be adjusted against profit of another. Only losses or profits out of separate business activities of the same legal entity can be offset against each other. Two partnership firms are two independent legal entities and are assessable separately despite being identical and having same partners.

REPLY :  

Yes, you can take loan for higher studies from any bank or approved financial or charitable institutions. Repayment of principal and interest to the extent of RS.40,000 p.a. can be claimed as deduction from taxable income, for eight years starting from the year in which the repayment begins.

REPLY :  

It appears you are confused. Firstly, the rule applies only:

i where the education is provided to the children of the employees in educational institution maintained and owned by the employer or

ii where the free educational facilities are allowed because the employer has made specific arrangements for free educational facility for children of its employees.

Secondly, the cost of education met by the employer in the first case and or value of educational facilities in a similar institution in or near the locality should not exceed Rs. 1000 p.m. per child.

Thus reimbursement of fees or direct payment by the employer to any other schools and institutions where the employer has no role to play would be taxed in full.

REPLY :  

The new valuation rule provides for taxation of benefit enjoyed by the employee or a member of his household by way of use of movable assets belonging to his employer. Taxable value of the perquisite shall be either 10 % p.a. of the actual cost of asset or amount of rent or charges paid or payable by employer, as the case may be

But fortunately for you, the rule specifically excludes provision of laptops and computers. No taxable perquisite would arise even if the laptops or computers are used only for personal purposes.

REPLY :  

Higher rebate of 30% instead of 20% is available provided following conditions are fulfilled:

• Salary income before claiming standard deduction does not exceed Rs.1,00,000, and
• In case you also have income from sources other than salary, the salary income should not be less than 90% of gross total income

Since your salary income before deducting standard deduction is less than rupees one lac, the first condition is fulfilled.

But your salary income after standard deduction i.e. Rs. 60000 (90000–30000) is less than 90 % of gross total Income of Rs. 80,000 (salary plus interest) and hence you are not entitled to claim rebate at enhanced rate of 30%.

I may mention that this benefit is of theoretical interest to female tax payers as they are eligible for additional tax rebate of Rs. 5000 and senior citizen pensioners, who are eligible for additional tax rebate of Rs. 15,000. Hence, in both the cases there is no tax liability for salary upto rupees one lac per annum.

REPLY :  

Loan from your employer may put additional tax burden on following accounts:

Firstly, tax rebate upto Rs. 4000 p.a. u/s 88 towards repayment of principal and interest would be denied since such rebate is available only if the employer providing the loan is either a public company or public sector company, or a University or College. Only loans taken from Central/ State Government, Banks, LIC, National Housing bank and other approved agencies entitle you for rebate.

Secondly, you would be liable for additional tax on the interest concession of 3% p.a. according to new perquisite valuation rule.

Thirdly while calculating income form the house property, only actual interest paid by you would be deducted rather than notional interest on which you would pay tax.

You should calculate net interest burden after providing for tax implications under both options besides matching other conditions with regard to hypothecation, third party guarantee, and prepayments etc before taking any decision.

REPLY :  

Free tickets availed by the employee were made taxable as perquisites w.e.f. 1st October, 2001. As a result tax was to be deducted at source from the salaries. However the taxing provision is deferred for one year vide CBDT Notification No.22/2002, F.No.149/15/2002-TPL dated 4th February 2002. Now value of free or concessional tickets availed on or after first day of April 2002 shall be subject to income tax.

For the tax already deducted by the employer on the free tickets there are two options: one the adjustment may be made by the employer in the current year while deducting tax for the month of March2002, second the balance of excess tax deducted can be claimed as refund from the Income Tax Department by filing income tax return in a normal course.

REPLY :  

Clubbing provisions were introduced to check unwarranted transfer of income producing assets to near and dear ones to reduce income tax liability.

Section 64 of the Income Tax Act, amongst others, considers two instances of clubbing of income of spouse in the hands of individual. (a) Where spouse is receiving directly or indirectly any income by way of salary, commission, fee or any other form or remuneration whether in cash or in kind from a concern in which such individual has substantial interest, provided that this provision shall not apply where the spouse possess technical or professional qualification and the income is solely attributable to the application of his or her technical or professional knowledge and experience; (b) Where income arises to the spouse from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart.

Your case is hit by both the provisions. Whether you gift the money to your wife for investment or not, any remuneration received by her from the firm shall be taxable in your hand. In case your wife is technically qualified and is going to contribute in the managing of affairs of your business then her remuneration etc. shall not be taxed in your hands. It will not be out of place to mention that since the share of profit in the firm is exempt from tax under Section 10(2A) of the Income Tax Act, the same arising to your wife will not be clubbed with your income.

REPLY :  

Your brother is correct. In case of non-residents, any income deemed to accrue or arise in India is taxable in India. In case of interest, if the loan is borrowed and used by a resident for any business outside India then that interest is not treated as income accruing or arising in India in the hands of non-resident. Otherwise, it will be taxable.

In this case though you borrowed that amount for your business in Dubai but actually used it for business in India. Consequently, the interest on the loan will be taxable in India in the hands of your brother.

REPLY :  

Builders carrying on the business of civil construction, including supply of labour may declare 8% of the gross receipts, as taxable profits provided gross receipts from such business do not exceed Rs. 40 lakhs per annum.

However if the builder feels that his income from such business is lower than 8%, income deemed under these provisions, then he has to maintain books of accounts as per section 44AA and get the accounts audited by a chartered accountant as prescribed in Sections 44AD and 44AB of the Income-tax Act.

REPLY :  

Private insurers have also been brought at par with LIC on many accounts. An investment upto Rs. 10000 per annum qualifies for deduction to effect or keep in force a contract for any annuity plan of Life Insurance Corporation or any other for receiving pension from the specified fund.

REPLY :  

R. As per the income tax act, if a person transfers any assets by way of gift or will then he will not be chargeable to capital gain tax on such asset. But, as per the clubbing provisions if one person transfers an asset to his or her spouse without adequate consideration then income on such asset to the transferee will be clubbed in the hands of the transferor. In your case, transfer of shares by you to your wife will not be charged to tax but the period for which such shares were held by you, and cost of acquisition to you, shall be taken into consideration while computing the capital gains on sale of such shares by your wife, and also such capital gains shall be clubbed with your income as such capital gains will be deemed to be an income accruing on shares transferred by you and will be taxed accordingly.

REPLY :  

Any benefit or perquisite whether convertible in money or not arising during the course of carrying on of any business or profession chargeable to Income Tax as profits of business and therefore, in your case the value of two air tickets received will be charged to tax as profits from business and you are required to disclose such income accordingly.

REPLY :  

Though tax benefit under section 80HHE for export of software can be claimed but the benefits are being gradually pruned. For the year ending 31.03.2003, only 50% of the export profits are exempted from tax, and 30% for the next year and zero % for subsequent years.

Under these circumstances it is advisable to take benefit under sections 10A or 10B of the Income Tax-Act, which is available till assessment year 2009. For the year ending 31.3.2003, 90% of the profits and gains derived from the export are deductible, which is higher than benefits available under section 80HHE.

However, for claiming tax benefits under section 10A/10B, you would have to register with Software Technologies Park in India (STPI), and comply with the prescribed conditions. STPI has regional offices at various locations. For Northern India, the regional office is located at NOIDA. Form “SOFTEX” attested by the Jurisdictional Director of STP is to be submitted to RBI, after affecting exports for claiming necessary tax benefits.

It is important to note that the STP unit can be started as a division of the existing company and it need not be a separate company. However the accounts pertaining to STP Unit are to be maintained separately.

There are many other advantages for opting for STP registrations. Subject to certain conditions, the STP units are allowed to import all types of capital goods required for the software development, free of import duty and also they can procure duty free capital goods from the Indian market. The STP units are also permitted import of capital goods for the particular projects from the client on loan basis. STPI also provides high-speed data communication to the software exporters.

REPLY :  

Where a salary earner receives salary for more than 12 months during any financial year, his income may be subjected to a higher rate because of increased slab. In such circumstances, it is open to the employee to claim relief as provided u/s 89(1) of the Income tax. This relief is provided to even out differences, on account of tax rates, slab rate or changes in surcharge, etc.

However, as far as rebate on account of certain investments in PF, LIC etc. available under section 88 are concerned; the Act clearly says that it shall be available only in the year of payment. Therefore you have to claim rebate on Rs.5000 from current years’ income only and not from income of earlier years’.

REPLY :   

Yes, you are eligible for a tax concession on the amount paid by you as rent. This concession is in the form of a deduction from total income available to a self-employed person and/or a salaried employee who is not in receipt of house rent allowance at any time during the year.

However, while claiming the concession the following points should be taken into consideration:-

• The person, his spouse or minor child or the HUF in which he is a member should not own any residential accommodation at that place
• No claim for self-occupied property should be made in respect of the accommodation;
• A declaration in Form No. 10BA should be made wherein the details of rent paid and fulfillment of the other conditions are confirmed

Rent paid is allowable as a deduction from salary/total income to the extent of the least of the following:-

• Rs. 2000 per month
• 25% of total income
• Excess of rent paid over 10% of salary

REPLY :  

A person is liable to pay tax only on his own income. In some cases, he is also liable in respect of income of certain other persons. You have purchased the ticket jointly with your sister. Hence you both are the joint owners of the ticket.

Therefore the receipt of lottery income will be taxed separately and not the total income in your hand. This view was also given by the Kerala High court in CIT V. K.K. Kochammed.

REPLY :  

Normally amounts received under life insurance policies including sum allocated by way of bonus is tax-free. But annuities or pension received under various schemes of LIC where the motive is to provide return on investment or annuities for life are subject to tax.

In case where annuity amount is based on some assured known return and it is possible to separately identify the capital amount and interest thereon, the capital portion may be treated as tax-free and only interest component should be taxable. However, where the annuity is payable by way of promise over the life of annuitant, the capital invested by the annuitant ceases to exist as such and gives rise to income in the form of annuity which is fully taxable as in case of jeevan suraksha.

Circular no. 762 issued by the CBDT clarified that any amount received on the maturity of such pension scheme as a commuted value in lump sum is exempt from tax by the pension received by the scheme holder is taxable.

The following are the tax benefits:

• Annual premium is eligible for tax rebate under section 88 of the income-tax act.
• Amount received on death, maturity or otherwise is exempt from income tax under section 10(10D) of the act.
• Deduction under section 80CCC is available.

REPLY :  

House Rent Allowance (HRA) granted by employer to employee to meet expenditure on rent, is exempt form tax, provided the employee is actually living in a rented accommodation. Quantum of exemption depends upon the place where the accommodation is situated and it would be least of following:

• HRA received; or
• Rent paid in excess of 10% of salary
• 50% of salary in case of Delhi/ Kolkata / Mumbai / Madras (40% in other cities)

In case of employee assesses, it is the employer who deducts the tax at source while paying salary to the employee. The employer has been given powers to grant exemption of HRA according to above rule provided, he is satisfied that the employee is not living in house owned by him and the rent has actually been paid by him. The employer may insist on production of some proof of payment of rent.

As far as first leg of your queries is concerned, let me explain the legal position of tax deduction machinery. Tax deducted by the employer is only one of the methods of collection of tax. In case of shortfall, the employee is liable to pay self-assessment tax along with the return. Similarly, in case of excess deduction, the employee may file his return to claim the refund, on the basis of Form 16 issued by the employer and other documents to the satisfaction of assessing officer. [Management of ITC v Presiding Officer, Labour Court (2000) 244 ITR 731 (Pat)]

REPLY :  

Income tax return for the current year shall be filed in Delhi in the Salary Circle and an application is made to the Commissioner Mumbai, intimating about the change and requesting for transfer of file.

Further, according to recent reorganization of jurisdictions in Delhi, the salaried employees shall file their return for the current year on the basis of name of the Employer Company where they are presently employed, unless other wise specified. For instance, in case of employees of working with PSUs, Ministries, Central and State Governments etc., jurisdiction is fixed on the basis of employment.

In case of businessmen, the return is to be filed as per the business address in the same Ward/ Circle or Special Range where there are already assessed and the return for the earlier year was filed. In case of first timers, the return shall be filed in the New Assessee Circle or Circle or Ward specified for this purpose.

As far as PAN is concerned, fresh PAN need not be applied, however you should intimate the Assessing officer at Mumbai, where you were filing the returns, for transfer of PAN to the assessing officer in Delhi.