REPLY :  

Recipient of income is taxable even though there are rival claims as to the title or the source of the income. Since the property as well as the income thereon is in your possession and control, the liability to pay tax falls on you. Also, in such cases, the Income tax department is free to decide as to the owner of the property as far as the income from the property is concerned.

The Income-tax liability cannot be held up or postponed merely because of existence of a dispute regarding the title of income. Therefor you should pay the tax due on year to year basis.

In case you loose the case of partition and the disputed property along with the income over the years is transferred to your brother, the tax paid by you may be claimed from the disputed income.

REPLY :  

Yes, the business loss incurred by you can be set off against your salary income, however if the loss is not wholly setoff against your salary income of that year, so much of the loss which is not so set off can be carried forward to be set of only against business income.

REPLY :  

UTI being instrumentality of the Government, most of the retail investors had relied on this Scheme in order to earn a decent dividend without loosing the capital. Also considering the fact that the loss on account of fall in the repurchase price from Rs.14.25 to Rs.10 is irreparable, one has to see what is left in store for the investor as on date. In my opinion the UNIT 64 should not be sold in a hurry. It is better to hold your option to sell till at least July 2002 unless you are in immediate need of cash.

For first 3000 units my reasons for saying so are:

• The administered repurchase price of July 2002 at Rs.11 per unit would yield 10.9% on annualised basis in addition to the indexation benefit.
• Tax free dividend to be declared in July 2002.

Annualised return on these two account would be better than most of the assured return being offered through bonds, post office deposit, bank deposits or income scheme of Mutual Funds.

As far as the units beyond 3000 are concerned one may take a fresh look at the prevailing NAV when the repurchase commences in January 2002.

REPLY :  

The Central Board of Direct Taxes vide Circular No.447 dated 22nd January, 1996 had clarified the taxability of awards to sportsmen. Accordingly in case of sportsman who is a professional, the award received by him will be in the nature of a benefit in exercise of his profession and, therefore, will be liable to tax under the provisions of the Income-tax Act. However in the case of a non-professionals, the award received will be in the nature of a gift and/or personal testimonial hence not liable to be taxed.

Therefore it has to be first seen whether your cousin is a professional cricketer or not. If he is a professional cricketer the amount received by him will be taxable.

REPLY :  

Life is insured under policies of Life Insurance. Until now, only Life Insurance Corporation of India was allowed to sell Life Insurance Policies. Most of the schemes of LIC are investment-cum-insurance plans. Under these schemes generally, the insurance amount is returned back to the insured after an agreed period along with bonus declared by the LIC. Therefore, generally the premia was high. However, now a days a new concept has come out which have been floated by private insurance companies, allowed by Government, to sell Life Insurance. Some of the schemes are purely insurance, which means whatever premium you pay is your expenditure only. However, these schemes gave a large cover against a very low insurance premium suitable in situations like that of yours. E.g. – Royal Sunderum in Association with Citi Bank provides a personal accident insurance cover of Rs.25 lacs against the premium of Rs.2.41 per day (879.65 per annum).

Whereas in case of LIC’s Money Back or other Endowment Schemes the premiums are very high, since the money has to be returned by the LIC after maturity date even if the insured survives. Therefore, take your decision depending upon your earning and saving capacity.

REPLY :  

a) Am I entitled to leaves for the notice period as I have accepted the notice pay? b) Is leave encashment tax free in case of resignation? a) If you accept notice pay without actually serving for the notice period then you are not entitled for encashment of earned leaves for the notice period. Earned Leaves are earned by an employee while attending to the office of the employment.

b) Yes, you are eligible to claim the deduction. Encashment of earned leaves is exempt from tax up to the limits prescribed if the employee leaves the concern by way retirement or on account of resignation (CIT v. Shahney (RJ) 159 ITR 160( MAD)

c) In the absence of information as to the number of the employees working in your company and nature of working of the company, it is not possible to comment on your rights at retirements.

However in cases where the PF and Gratuity Acts are applicable one can have following remedies on non payment of dues.

• An employee who has completed continuous service of five years is entitled for gratuity under Payment of Gratuity Act, 1972.]
• In case of non payment of gratuity one can approach the controlling authority which in turn will issue a certificate to the Collector, who will recover the amount along with compound interest as arrears of land revenue.
• Employer has to contribute a specific amount every month towards PF Scheme along with employees' contribution. Total contribution along with interest thereon is payable as per the scheme. In case the amount is not paid one can approach the Authorised Officer who will issue a certificate to the Recovery Officer to recover the amount by attachment or sale of movable and immovable property of employer.

REPLY :  

Agricultural income is exempt from tax and do not by itself require filing of return. However any revenue derived from agricultural land which is situated in India and is used for agricultural purposes comes under the definition of agricultural income under the Income-tax Act even if the land is not owned by the person concerned. ~

REPLY :  

Exemption of any amount received under Voluntary Retirement Scheme is available for only one assessment year. Therefore, I am afraid any amount received by you under this scheme in this year or in future period will be taxable in your hands as you have already claimed the benefit of this exemption at the time of first retirement.

REPLY :  

The question of claiming rebate under section 88 arises only if one has tax liability in the current year. Also income chargeable to tax is more relevant than to match the investment with inflow of funds. It is also immaterial whether the income chargeable to tax belongs to the current year or any preceding years. Maturity proceeds of NSC gives rise to funds that are available for investment along with other funds generated out of taxable income. Hence reinvestment of maturity proceeds would be eligible for rebate if you have other taxable income

REPLY :  

Gift is a transfer of any property by one person to another made voluntarily and without consideration in money and moneys worth. On the other hand, casual and non-recurring receipts beyond Rs. 5000 are taxable income. Both are out of the purview of normal business parlance. Value of benefit or perquisite, whether convertible into money or not, arising out of business or exercise of profession are treated as chargeable business income. Putting in additional effort and achieving a specified turnover is a business transaction while carrying on business activity. Whether you take the incentive for such effort in the form of a car or in the form of money is not material. Such incentive is a business income and can not be equated with either gift or casual non- recurring receipt

REPLY :  

This is a departure from accepted line wherein perquisites provided by the employer are normally valued at the ‘cost to the employer’. On the other hand, under the new perquisite valuation norms, free air tickets to the employees of airlines would now be taxed at such value at which such benefit or amenity is offered by such undertaking to the public.

As put forward by you, the cost of free tickets to employer should be somewhat less than normal tickets for two reasons:

(a) Operational costs to the Airlines usually remains unaffected on account of empty seats, which otherwise are allotted to the employees as free tickets.

(b) Services being offered to normal passengers are not the same as provided to the employees using free tickets.

I agree with your view that same yardstick should not have been applied to measure two different products. Undoubtedly air ticket pricing is a composite function of distance or place traveled and services offered by the airlines to its valued customers. Valuation of perks at the same value as recovered from customers would be unfair to the employees if services provided differ materially.

REPLY :  

Foreign Exchange and Management Act (FEMA) provides that a resident can borrow upto US $ 2,50,000 or its equivalent from close NRI relatives after seeking an approval from RBI. The loan should be interest free and repayable after at least seven years. The loan so received cannot be used for agricultural/ plantation activities; purchase of any immovable property or shares and re-lending activities. Receive the loan only using normal banking channels or through debit to NRE/FCNR account. For loan exceeding the above mentioned limit, prior approval from Central government is required.

REPLY :  

NRI, who is a citizen of India can acquire any immovable property other than agricultural / plantation / farm house without any approval from Reserve Bank of India.

Your brother can take a housing loan from any authorised dealer or approved housing finance institution for acquiring a residential accommodation, provided the conditions as to quantum of loan and the period of re-payment are at par with those applicable to other person resident in India. The loan shall not be credited to NRE, FCNR, NRNR account of the borrower and it has to be fully secured with mortgage of property proposed to be acquired. The installment and interest shall be paid by remittances from outside India through normal banking channels or out of funds in NRE, FCNR, NRNR, NRO, NRSR account in India or out of any rental income received from renting of property acquired by utilisation of such loan. The rate of interest shall confirm to the directives issued by Reserve Bank or by National Housing Bank.

REPLY :  

Reimbursements made by the employer towards mediclaim premium paid by the employee is a tax-free perquisite. Since you are also entitled to claim deduction on account of payment borne by you under section 80D care should be taken that payment of the premium is made only by way of cheque out of your taxable income. Payment by way of cheque is a precondition otherwise you may loose benefit on the portion of the premium borne by you.

REPLY :  

Income of minor child is clubbed with the income of the parent for the purpose of taxation. In case the income accrues or arises to a child on account of manual work or an activity involving application of his/her skill, talent or specialised knowledge and experience, the same is not clubbed. Scholarship received by your daughter is a result of application of skill and talent and hence it would not clubbed with your income. However, the interest earned on bank deposit does not involve any activity/skill/talent attributable to her and hence it should be clubbed with your income.

REPLY :  

Since there has been waiver of debt by other partners, it does not constitute as income in your hands. Further, since the firm has foregone the debit balance of the capital account the same is a capital loss and not a revenue loss for the firm. Moreover, as it is not arising out of the business of the firm, it cannot be claimed as expenditure.

REPLY :  

Investments made by way of premium in the Jeewan Suraksha Scheme are entitled to tax rebate under section 80CCC upto Rs. 10,000 per annum. Once a rebate is taken under this proviso the same amount is not eligible for rebate under section 88.

Jeevan Suraksha Scheme of LIC offers monthly annuity payments akin to pension with an option to commute 25% of the basic sum assured plus accrued guaranteed additions. The taxability of the returns is as follows:

(1) Monthly pension – fully taxable on receipts basis
(2) Commuted value of pension – Tax exempt
(3) Premature surrender value – fully taxable

The scheme suitable for self employed and professionals offers three options on survival of the proposer on the vesting date:

(a) Annuity Guaranteed for 5, 10, or 15 years and payable for life thereafter.
(b) Annuity for life without any guarantee period
(c) Joint life and last survivor annuity under which annuity will become payable to the spouse on the death of the proposer at the rate of 50 %.

REPLY :  

Government is very well seized of the inflationary impact which foreign exchange may generate in the real estate market in India. Recently enacted FEMA (Foreign exchange Management Act) has very cautiously opened this sector for investment from abroad. It allows non-resident Indian citizens or person of Indian origin resident outside India to invest in immovable property in India except investment in agricultural land, plantation property and farm house. For purchase of residential property, no pre or post permission is required from RBI provided the funds are received in India by way of inward remittance from any place outside India, or the investment is made out of funds held in non-resident account maintained in accordance with the provisions of the Act. If the property is not be used for any business activity, RBI need not be informed, otherwise a declaration on form IPI is to be filed with the RBI within 90 days of receipt of the remittance.

I see no problem in joint ownership with you or any other Indian citizen. Gifting away his share in the property to you or any other person who is an Indian citizen is also permissible. But if chooses to sell his share this in the property he may be allowed to repatriate the sale proceeds out of India only if the sale takes place after three years. Also the amount to be repatriated cannot be more than the amount received as inward remittance at the time of purchase.

REPLY :  

The banker was right in turning you away since the PPF law allows partial withdrawal any time after expiry of full five financial years from the end of the year in which the initial subscription was made. Secondly, it does not operate on calendar year basis. Rather it operates, like Income- tax Act, on financial year basis, i.e. April to March. You made initial subscription in the FY 1995-1996 and hence you shall be entitled to make first withdrawal any time in FY 2001-2002. Extending the same analogy further, the account will mature after being in operation for full fifteen years. You can come out of it in FY 2011-2012. With regard to the quantum of withdrawal, you are entitled to withdraw 50% of the qualifying amount. The qualifying amount being lower of the amounts outstanding to your credit on:

(a) 31.3.2001 i.e. last day of immediately preceding year of withdrawal, and
(b) 31.3.1998 i.e. last day of the fourth year immediately preceding the year of withdrawal. Also you are not entitled to make more than one withdrawal in one financial year, therefore carefully calculate your needs and withdraw the desired amount at one go.

REPLY :  

According to Savings Bank Rules, a savings bank holder will not be permitted more than 50 debits on his account in a half-year. If number of transactions effected by you is more, then your Banker is right in advising you to open a current account. But simply operating a current account for dealing in shares does not amount to business activity and you may still maintain this activity as investment activity. On the other hand if you choose to convert the investment activity into business activity you may treat your investment as stock-in-trade. Notional capital gain equivalent to difference between cost price and the market value on the date of conversion would arise. This capital gain would be taxed in the year in which these shares are sold, at a concessional rate applicable to capital gains. But any income over and above this capital gain would be treated as business income and taxed at normal rates applicable to you depending upon the tax bracket to which you belong.