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What are the payment options available at TaxSpanner?

You can make payment through BillDesk payment gateway available at our website. BillDesk supports various banks and payment modes viz. Internet Banking/Credit Card/Debit Card/Debit Card+ATM PIN. If you face any problem while making payment through debit/credit card on BillDesk, switch over to internet banking to make payment and vice-versa. You can also try making payment through some other bank.

 

Alternatively, you can pay the TaxSpanner fees through online banking to the below mentioned bank account. Do not forget to share the screenshot of the transaction with support@taxspanner.com.

  1. Full Name of beneficiary: Span Across IT Solutions Pvt. Ltd.

  2. City: New Delhi

  3. Bank: Citibank

  4. Branch: Jeevan Bharti Building, 124, Connaught Circus, New Delhi

  5. Beneficiary A/c Type & No.: Current Account, 0005690226

  6. IFSC code: CITI0000002

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What are the instructions to send ITR-V to CPC?

ITR-V is an acknowledgement slip generated on filing the income tax return online. This ITR-V is to be signed and sent to the Income tax department-CPC by post to complete the return filing process.

The password of the document is a combination of PAN (in lower case) and date of birth in the format ddmmyyyy. For example, if the PAN is AAAAP0000A and the date of birth is 10-Jan-2008, the password is aaaap0000a10012008.

You should consider the following Do's and Dont's for printing and submitting of ITR-Vs to ITD-CPC Bangalore to complete the e-filing process:

  1. Only A4 size white paper should be used.

  2. Ensure that print out is clear and not light print/faded copy.

  3. The document to be mailed to CPC should be signed in original in blue ink only. The TRP Column is to be left blank.
  4. The signatures or any text should not be written on the Bar code. The Bar code and numbers below the bar code should be clearly visible.
  5. Avoid typing anything at the back of the paper and folding the paper.
  6. Please do not submit any annexures, covering letter, pre stamped envelopes etc. along with ITR-V. Do not use stapler on ITR-V.
  7. In case you are submitting original and revised returns, do not print them back to back. Use two separate papers for printing ITR-Vs separately.
  8. The ITR-V form is required to be sent to "Income Tax Department - CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka" by regular Indian Postal Service or speed post only (courier is not accepted). If you are sending the signed ITR-V through speed post, delete the text "Post Box No - 1" from the address.
  9. The ITR-V should reach CPC within 120 days of filing of return.
  10. ITR-Vs that do not conform to the above specifications may get rejected or acknowledgement of receipt may get delayed.

When do you need to re-post the signed ITR-V?

It generally takes about 3 weeks from the date of posting ITR-V, for CPC to send acknowledgement of the same on your registered email id. If it has been more than 3 weeks since you posted your signed ITR-V and you have not received the acknowledgement for it yet, you need to post another copy immediately to the Income Tax Department-CPC.

The non-receipt of ITR-V at CPC may be due to any of the following reasons:

  1. The ITR-V may be in transit via India Post.

  2. The ITR-V may be under process at CPC, Bangalore.

  3. Your ITR-V may be defective, viz. not signed ITRV or signed in black or got torn in the transit or its bar code could not be scanned.

  4. Your ITR-V may have been misplaced in transit.

Since the only means of posting signed ITR-Vs to CPC is through normal/ speed post, there is no tracking number available. Hence, it cannot be confirmed whether the posted ITR-Vs have reached CPC and by when.

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I have invited few of my friends to use TaxSpanner.com. When exactly do I become eligible for credits?

You get credits worth Rs. 100 every time a friend of yours files return on TaxSpanner.com through the link shared by you.

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Where can I see the credits earned by me?

Your credits are stored in the 'Payments' section available in the drop down on the top right corner of your dashboard.

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What is the process to redeem my credits?

Whenever you purchase any package from your account, the credits earned by you are automatically adjusted from the MRP. If the credits are more than the MRP, the remaining credits are still available in the 'Payments' section redeemable against your next purchase.

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I have already made payment for return filing at TaxSpanner.com. What are the other ways/packages against which I can redeem the credits earned by me?

There are many packages/services available at TaxSpanner besides the plain vanilla return filing package. You can avail any of the below mentioned packages/services as suitable for you. Apart from this, you can also redeem your credits by availing package to file returns of your family members/friends from your account.

  1. FILE & SAVE TAX (CA Assisted): Tax Optimization tool and report, ITR prepared by tax expert and reviewed by CA for AY 2016-17 (FY 2015-16).

  2. FILE & PLAN TAX (CA Assisted): All features of FILE & SAVE TAX (CA Assisted), 60 minute CA talk-time, Capital Gains/F&O/Loss carry forward.

  3. Tax Optimizer (Dedicated CA): All features of FILE & PLAN TAX (CA Assisted), 4-hour CA talk-time, Tax consulting for long-term goals, Response to tax notice.

  4. IT Department Followup: For filing Revised Return, filing Rectification, tracking Refund Status.

  5. 60-minute CA Phone call: For any tax queries, tax consulting, tax saving recommendation.

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I have already made payment at your website, and then I earned credits by inviting my friends. Can I use these credits to get back the payment made by me?

The credits earned by inviting friends are redeemable only against the next Package purchase made at TaxSpanner. However, these credits can't be adjusted against the payment made before earning the credits.

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What is the maximum credits that I can earn?

There is currently no upper limit to the credits earned by you. You can invite as many friends and earn as many credits as possible.

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How to file return without TAN number of employer?

Q: I am an NRI trying to use your software for filing returns. My employer doesn't have a TAN number. What should I do?

 

Ans: Assuming you are working for an Indian company. As per Income tax laws any person (Company) responsible for paying any income chargeable as "Salary" in India is required to deduct tax at source (TDS) on the amount payable to employee. Deduction of tax from salary is the statutory responsibility of employer and for depositing the tax company needs to obtain TAN number. Hence, you need to provide the TAN number for e-filing the income tax return this helps in matching the tax deducted and deposited by employer at the income tax department end.

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How can I file my paper IT return?

TaxSpanner will provide your completed income tax return as a PDF file. You have to print your income tax return, sign it, and submit it at the nearest income tax office. You will receive the stamped Acknowledgment from the receiving officer.

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What are the benefits of efiling income tax return with DSC?

If you efile your tax return without digital signature certificate (DSC), then you have to post/mail one-page efiling acknowledgment (ITR-V) at the income tax PO Box. If you efile your IT return along with your digital signature, then you do not need to deposit ITR-V.

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Efiling income tax return with or without digital signature certificate?

Q: What is the difference between efiling income tax return without digital signature certificate (DSC) and efiling income tax return with DSC?

 

Ans: When you e-file your tax return, you receive an acknowledgment from income tax department in your Email. This acknowledgment is a 1-page PDF file called ITR-V (ITR Verification). If you efile your tax return without digital signatures, then you have to mail (normal post or speed post only, courier is not accepted) this one-page signed efiling acknowledgment (ITR-V) to the income tax department's PO Box address: "Income Tax Department - CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka, India."

 

Please note that as per CBDT Circular No. 3/2009 (Dated May 21, 2009), No Form ITR-V shall be received in any other office of the Income-tax Department or in any other manner.

 

If you efile your income tax return along with your digital signature, then you do not need to post signed ITR-V.

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How can I efile my income tax return?

You have two options to E-file your income tax return:

A. Procedure to E-file IT Returns at TaxSpanner.Com through E-Return Intermediary

  • Authorize upload of your E-return (TaxSpanner is an authorized E-return intermediary)
  • Click the "Efile My Return" button on the last screen of TaxSpanner application.
  • Receive ITR-V in email.
  • You will receive one-page acknowledgment of your tax e-filing (named ITR-V) in your email.
  • You have to sign and post/mail a signed copy of ITR-V to the income tax PO Box.

B. Procedure to E-file your Income Tax Returns Yourself

  • Download your E-return
  • Download your electronic return (XML file) from TaxSpanner and save it on your computer.
  • Upload your E-return
  • Upload the saved XML file on Income Tax department website (www.incometaxindiaefiling.gov.in). If you have DSC (Digital Signature Certificate), attach DSC along with your XML file.
  • If you already have a username/password on Income Tax department website, login using that. Else, create your login using your name, date of birth and PAN.
  • Receive ITR-V in email.
  • You will receive one-page acknowledgment of your e-filing (named ITR-V) in your email. If you attached your DSC with the e-return, simply save your ITR-V. You do not need to do anything else.
  • If you did not attach your DSC with the e-return, then you have to sign and post/mail one copy of ITR-V to the income tax PO Box.
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When will I be able to efile my IT return?

E-filing is essentially another mode of filing your income tax return; in addition to the popular mode of printing and submitting your return at the income tax counters. Starting April 10, 2008, TaxSpanner has started providing e-filing of IT returns to the income tax department server through authorized e-return intermediary certification.

 

Every year, e-filing typically starts in May when the income tax department release the tax forms and the XML schema for e-return upload.

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How do I open ITR-V pdf file which is password protected?

Please note that the pdf document is password protected to ensure it is accessed by the appropriate user. The password is a combination of the PAN number (lowercase alphabet) and the date of birth in the format ddmmyyyy.

 

For example, if the PAN number is AAAAP2222A and the date of birth is 10-Jan-2008, then the password will be aaaap2222a10012008

 

In case you are unable to open the document, please contact Efiling Income Tax Administrator at ask@incometaxindia.gov.in providing the document along with pan number and assessment year.

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Is Digitally Signed Form 16 valid?

Majority of IT companies now send across soft copies of Form 16 to their employees, as the authorities have done away with the requirement to furnish hard copies of Form 16 or attach the same with the return of income. The relevant circular from the income tax department is as below:

CIRCULAR NO. 2/2007, DATED 21-5-2007

OPTION TO CERTIFY TDS CERTIFICATES BY WAY OF DIGITAL SIGNATURES – CIRCULAR UNDER SECTION 119 OF THE INCOME-TAX ACT, 1961.

 

1. The provisions of section 203 of the Income-tax Act, 1961 lay down that every person responsible for deduction of tax at source shall furnish a certificate of deduction of tax at source to the deductee specifying therein the amount of the tax deducted and the rate at which the tax has been deducted and other particulars prescribed under rule 31 of the Income-tax Rules, 1962. The relevant Form for such certificate in respect of tax deducted at source from income chargeable under the head "Salaries" is Form No.16.

 

2. Representations have been received in Board to the effect that some companies have a large number of employees and the issuance of certificates of deduction of tax at source with manual signatures is becoming very time consuming. The request, therefore, is that the Department should allow the employers to use their digital signatures to authenticate TDS certificates instead of signing the certificates manually. As the field formations are aware, the requirement of annexing TDS certificates with the return of income has been dispensed with. The TDS certificates are now issued only for the purpose of personal record of the deductees subject to the condition that they may be required to produce the same on demand before the Assessing Officer in terms of section 139C, inserted by the Finance Act, 2007. The TDS claim made in the return of income is also required to be matched with the e-TDS returns furnished by the deductors. Assessing Officers may, if considered necessary, also write to the deductors for verification of the correctness of the taxes deducted or other particulars mentioned in the certificate.

 

3. Digital signatures are being used to authenticate most of the e-commerce transactions on the internet. The transmission of information using digital signatures is failsafe. The Central Board of Direct Taxes have, therefore, in exercise of powers under section 119 of the Income-tax Act, 1961, decided for the proper administration of this Act to allow the deductors, at their option, in respect of the tax to be deducted at source from income chargeable under the head "Salaries" to use their digital signatures to authenticate the certificates of deduction of tax at source in Form No.16. The deductors will have to ensure that TDS certificates in Form No.16 bearing digital signatures have a control No. with log to be maintained by the employer (deductor). The deductor will ensure that its TAN and the PAN of the employee are correctly mentioned in such Form No.16 issued with digital signatures. The deductors will also ensure that once the certificates are digitally signed, the contents of the certificates are not amenable to change by anyone. The income-tax authorities shall treat such certificate with digital signatures as a certificate issued in accordance with rule 31 of the Income-tax Rules, 1962.

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How do I download Form 26AS?

It is beneficial to carefully compare your Form 26AS with your Form 16 so as to cross check the correct amount claimed in I-T return. Thus, the chances of Income Tax follow-up get reduced. The Income Tax portal also allows you to view Form 26AS of previous years (from AY 2007-08 to AY 2010-11). You will learn how to set up a new account with the Income Tax online portal and view/download the Tax Credit Statement (Form 26AS). If you already have an Income Tax portal account and you only need to view your Form 26AS, then you may scroll down and read Step 7 and Step 8.

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Download ITR1 form?

You may download the ITR-1 form by clicking the link corresponding to the Assessment Year:

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Download ITR2 form?

You may download the ITR-2 form by clicking the link corresponding to the Assessment Year:

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Download ITR3 form?

You may download the ITR-3 form by clicking the link corresponding to the Assessment Year:

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Download ITR4 form?

You may download the ITR-4 form by clicking the link corresponding to the Assessment Year:

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Download ITR5 form?

You may download the ITR-5 form by clicking the link corresponding to the Assessment Year:

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Download ITR6 form?

You may download the ITR-6 form by clicking the link corresponding to the Assessment Year:

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Download ITR7 form?

You may download the ITR-7 form by clicking the link corresponding to the Assessment Year:

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Download ITR8 form?

You may download the ITR-8 form by clicking the link corresponding to the Assessment Year:

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Download ITR V form?

You may download the ITR-V form from here by clicking the link corresponding to the Assessment Year:

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Download ITR 4S form?

You may download the ITR-4S form from here by clicking the link corresponding to the Assessment Year:

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How do I use taxspanner to prepare my income tax return?

Follow the process below to prepare your income tax return:

  1. Register yourself using emaild id and a unique password.
  2. Enter your information based on easy, interview-style questions. If you don't have any information handy, you can skip it.
  3. Preview your income tax return (ITR1, ITR2 or ITR4). Taxspanner automatically selects the tax return form for you.
  4. Taxspanner will perform a review and will remind of all the missing pieces of information. Enter them.
  5. Make payment.
  6. Review your draft ITR generated by taxspanner.
  7. E-file your income tax return through Income Tax Department approved e-Return Intermediary by clicking "Efile My Return" button on the last page. Or, download and print your final ITR and submit it at the nearest income tax office.
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What are the unique things about taxspanner?

  1. We do not ask you for payment until you are completely satisfied.
  2. We let you explore the complete portal without seeking personal details upfront.
  3. No pop-ups or advertisements or spam.
  4. We e-file your tax return through approved e-return intermediary.
  5. We use SSL encryption to keep your information highly secure.
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Why does taxspanner not provide the service of physical filing of income tax return?

We strive to provide flawless user experience at TaxSpanner. While we guarantee 100% accuracy and total satisfaction for taxspanner.com service, we have not found logistics of handling physical returns which can guarantee as flawless an experience as the TaxSpanner website. Therefore, we do not provide physical filing service of income tax return.

 

But, if you are employee of a corporate in Delhi NCR, Bangalore, Mumbai, Chennai, Hyderabad, Pune, or, Kolkata, we provide employee tax helpdesks at corporate locations to facilitate tax return filing.

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When will I be able to efile my IT return?

E-filing is essentially another mode of filing your income tax return; in addition to the popular mode of printing and submitting your return at the income tax counters. Starting April 10, 2008, TaxSpanner has started providing e-filing of IT returns to the income tax department server through authorized e-return intermediary.

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How secure is taxspanner?

We have gone through rigorous security tests conducted by our major clients (IT companies), top private sector and PSU banks (ICICI, OBC, PNB), and HR outsourcing companies. Moreover, TaxSpanner.Com is tested hacking-safe by McAfee. TaxSpanner is also compliant to security standard OWASP Top 10 Vas.

 

So, our customers (majority of who come through our alliances with companies and banks) already know that TaxSpanner has passed all the security tests. Hence, they do not hesitate in providing their personal details.

 

In our opinion, rather than online security, the main issue with security of personal data is the mis-use of the data by some tax-filing companies, who use the data to either send spam emails to the users, or share the data with third parties who want to sell their products to these customers. TaxSpanner has strict non-third party data sharing policy and no-spamming policy. Our customers greatly value these policies.

 

In addition, we upload all e-returns to the govt. server through Authorized E-return Intermediary Certification. All these returns are upload securely over 128-bit encrypted SSL.

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What are the details/documents I need to submit under ITD followup service?

There are many scenarios covered under ITD followup service viz. Revising return, Rectification, Refund follow up, Filing Belated return u/s 139(4), Reviewing Intimation, etc. Below is the list of information and documents under each scenario.

 

On making payment for the service, you would receive an email with the subject “Re: 1000XXXXXX”. You can revert to the email with the below mentioned details/documents, as applicable to your case for faster processing of your request. Else, you can wait for our Service Provider to get back to you for assistance within the next 24 hours.

 

Note: All customers should copy paste the following declaration while replying to the email, besides providing the other information sought.

 

Declaration: I hereby declare that the information provided above is true and can be used to add me as a customer of TaxSpanner.com at Income Tax Department's efiling website, to retrieve any status/information and/or take necessary actions on my behalf.

 

Accessing 'My Returns Status' Tab
Full Name (as per PAN):
PAN:
DOB(dd-mm-yyyy):
Mobile Number:
Email ID:
************************
Do not forget to attach copy of PAN.

 

Filing Revised Return
If original return has been filed through TaxSpanner:
Full Name (as per PAN):
PAN:
DOB(dd-mm-yyyy):
Mobile Number:
Email ID:
************************
Do not forget to attach FORM 16 & copy of ITR-V

 

If original return has not been filed through TaxSpanner:
Email-Id:
Full Name (as per PAN):
Father's Name:
Gender(M/F):
Date of Birth(dd-mm-yyyy):
Form 16 Password (if applicable):
Flat/Door/Block No:
Road/Street/Post Office:
Area/Locality:
Town/City/District:
State:
Country:
PIN Code:
Mobile number:
Bank account number (mandatory):
IFSC Code(mandatory):
************************
Do not forget to attach FORM 16 & copy of ITR-V

 

Filing Rectification
Full Name (as per PAN):
PAN:
DOB(dd-mm-yyyy):
Mobile Number:
Email ID:
************************
Do not forget to attach copy of INTIMATION and copy of RETURN FILED

 

Tracking Refund Status
Full Name (as per PAN):
PAN:
DOB(dd-mm-yyyy):
Mobile Number:
Email ID:
************************
Do not forget to attach copy of PAN and copy of ITR-V Filin

 

Belated Return u/s 139(4)
If original return has been filed through TaxSpanner:
Full Name (as per PAN):
PAN:
DOB(dd-mm-yyyy):
Mobile Number:
Email ID:
************************

 

If original return has not been filed through TaxSpanner:
Email-Id:
Full Name (as per PAN):
Father's Name:
Gender(M/F):
Date of Birth(dd-mm-yyyy):
Form 16 Password (if applicable)
: Flat/Door/Block No:
Road/Street/Post Office:
Area/Locality:
Town/City/District:
State:
Country:
PIN Code:
Mobile number:
Bank account number (mandatory):
IFSC Code(mandatory):
************************
Do not forget to attach FORM 16

 

Reviewing Intimation
If the Intimation has been received for the assessment year in which return was filed through TaxSpanner:
Full Name (as per PAN):
PAN:
DOB(dd-mm-yyyy):
Mobile Number:
Email ID:
************************
Do not forget to attach copy of INTIMATION

 

If the Intimation has been received for the assessment year in which return was not filed through TaxSpanner:
Full Name (as per PAN):
PAN:
DOB(dd-mm-yyyy):
Mobile Number:
Email ID:
************************
Do not forget to attach copies of INTIMATION, RETURN FILED, FORM 16, FORM 26AS, Documents related to Capital Gains, Income from House Property and any other Income.

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Which browsers should I use for best experience of TaxSpanner website?

Use Mozilla Firefox or Google Chrome for Best Experience

 

If you are using Windows XP with Internet Explorer, you might see "Certificate Errors: Navigation Blocked" while trying to access TaxSpanner's secure pages. (Secure pages use 256-bit SSL technology for keeping your data private.)

 

We recommend that you use Mozilla Firefox or Google Chrome for accessing TaxSpanner. These are FREE and modern web-browsers which support HTML5 features. They also support latest SSL technologies such as SNI-SSL which TaxSpanner uses to secure your content.

 

Certificate Errors are not experienced on Windows 7 and Windows 8 with Internet Explorer. Only Windows XP with Internet Explorer has this issue.

 

In case you have questions you can contact us anytime!

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How do I get the refund cheque if my address has changed?

Procedure to be followed if refund cheque not received due to change in address

 
  1. Know whether Return was filed online or manually.
  2. If return is filed online then refund will be processed by CPC Bangalore and need to send a request letter for change in address to CPC Bangalore or
  3. If return is filed manually then first it will be processed by the concerned officer and thereafter ECS/ Cheque will be issued by SBI. Write a letter to the department stating that refund cheque was not received due to change in address.
  4. Update the PAN Master Database - Apply for change in address in the PAN card in following form “Request for new PAN card / change or correction in PAN data.”

The applicant is required to fill all the columns of the form and tick the boxes on the left margin of the address for communication. He is required to give the following documents also along with the demand draft of Rs 94 made in favour of “NSDL – PAN” payable at Mumbai for payment

  • Proof of PAN – Copy of PAN Card, Copy of PAN allotment letter
  • Proof of PAN surrendered – Copy of PAN card for the PAN to be surrendered
  • Proof of identity- Copy of Ration card, Driver’s license, Voter’s ID card, passport or any other document
  • Proof of Address – Electricity bill, Telephone Bill, Passport, ration card
  • Proof in support of the change required – proof of the changed address

Provide the address which was filled in your ITR and the changed address as updated in the PAN master Database

 

NOTE: For all your Communication to CPC Bangalore you need to mention your CPC reference no.

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How do I track income tax refund for TDS deducted from salary?

You need to file your income tax return for the year for which refund is sought. It is being claimed and noticed that the return filed online are getting refunds faster. Hence, we recommend you to e-file income tax return. If return has already been filed manually, you should write a letter to the concerned ITO along with the copy of Form 16 and ITR for the relevant year stating that your refund is still pending.

 

You would get the refund as soon as the Income Tax department (ITD) processes your return. The status of ITD refund processing can be tracked at https://tin.tin.nsdl.com/oltas/refundstatuslogin.html. If it shows the refund has been processed but you have not received than call or write an email at:

 

For any Payment / Refund related query:

 

Payment related query - SBI Contact Centre
Call: 18004259760 (Toll free) Email: itro@sbi.co.in

 

Refund related query - Aaykar Sampark Kendra
Call: 0124 2438000 Email: refunds@incometaxindia.gov.in

 

CPC Refund related query - CPC Bangalore
Call: 1-8004252229 or 080-43456700

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How to save capital gains from sale of house?

Q: I had purchased 1BHK flat in pune in 1993. In 2002 I was able to buy another 2BHK flat which is now self occupied. I now intend to sell the 1st flat and invest the entire proceeds in buying another house (with balance amount as loan from bank) which may be self occupied and existing 2BHK given on rent. Will the capital gains received on sale of 1st house be fully exempt from tax under relevant existing sections and also under DTC if sold after 1st April 2012.

 

Also please advise on the tax treatment under DTC after April 2012 for your recomendation to invest in commercial property.

 

Ans: You can save the capital gain tax by investing only the amount of capital gain after indexation benefit in new house. In other words it is not necessary to invest the entire proceeds from sale of house to save capital gain. However, if you need money for buying house than you can invest entire sale proceeds.

 

If the house is not let out for a minimum of 300 days during the financial year than it will be liable for wealth tax @1%. This is applicable as per present law and there is no change proposed in DTC for vacant house. So ensure the occupancy more than 300 days for rented property.

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What are Municipal Taxes?

It is the tax levied by local authorities in respect to your house property.

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What is the basis of chargeability of tax under “income from house property”?

Any income from a property can be charged to income tax under house property only when:

  1. None of the portions of the property is used for the purpose of carrying on business and profession.
  2. The property must consist of land and buildings.
  3. You should be the owner of such a house property.
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Do I necessarily need to be the owner of land on which I own a building?

No, you may not be the owner of the land on which the building is built. For example, you may own any one shop in a mall, but not own the land on which the mall has been built.

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When can I consider a property as self occupied?

Q: I have a property which could not be occupied by me due to the fact that I was employed out of that place where my property is situated. Can I consider this property as self occupied?

 

Ans: Yes, a property that could not be occupied by you due to being employed out of the place where the property is situated will be considered as self occupied property provided you stay in a rented house at your place of work.

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Can annual value exceed the standard rent?

No, the Annual Value cannot exceed the standard rent.

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Can expected rent be lower than standard rent?

Expected rent cannot exceed standard rent, but it can be lower than standard rent.

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Can a leasehold right holder of a property be the actual owner?

Yes, the owner of freehold, leasehold rights or deemed owner can be the actual owner of the property.

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What is the treatment of the house if I have multiple house properties?

Q: What is the treatment of the house, if I have multiple house properties and one of them is occupied by me for self residence and others are given to my parents?

 

Ans: If you have more than one property, only one of them can be treated as self-occupied and others shall be treated as deemed to be let out.

 

A property shall be treated as self occupied only if no consideration is received from your parents for their stay in the house.

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Is vacant land included in house property?

No, house property does not include vacant land.

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Is municipal tax levied upon the owner or the occupant?

Municipal tax is levied upon the owner.

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What is the tax treatment if it is my business to let out property?

Q: If it is my business to let out property or rooms in the house or if the property is kept as stock in trade, will my income be charged under Business or Profession or under House property?

 

Ans: Your income will be charged under House property even if it is your business to let out property.

 

Any income is not charged under house property if the property is used for carrying on business or profession the profits of which are chargeable under Income from business or profession.

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Can a mortgaged property (no benefit is derived from it) be charged to tax?

Yes, even if the property is mortgaged and no benefit is derived from it; such a property will be charged to tax. Gross Annual Value will be calculated treating it as a self occupied property if such property is used for the purpose of your own residence.

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What is tax treatment of rent received from letting of some part of building?

Q: Can rent received from letting of some part of building which is used for business be charged to tax under House Property?

 

Ans: Yes, if a part of building is let out, rent received shall be taxed under house property even if the other part of building is used for carrying on business which is taxed under income from business.

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Can income from property acquired through cash transferred to spouse be taxed?

Q: If I transfer some cash to my spouse or my child and some property is acquired out of that cash, can I be taxed for any income from such acquired property?

 

Ans: No, as you are neither the owner nor the deemed owner of the property you shall not be charged to tax for any income from that property.

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What is treatment of income from property acquired under money lending business?

Q: Can income of any property which is acquired under money lending business be charged to tax under House Property?

 

Ans: Yes, income of a property acquired under money lending business can be taxed under house property.

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What is tax treatment of rent from furnished or paying guest accommodation?

Q: If I receive rent from furnished or paying guest accommodation, will this be charged to tax under House Property?

 

Ans: No, if you receive composite rent and if the rent for additional services cannot be separated, such rental income is not taxable under house property. Such income will be either taxable under income from business or under income from other sources.

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What is tax treatment of rent from putting up hoardings on top of my building?

Q: If I receive rent from putting up hoardings on top of my building, can this be treated as income under house property?

 

Ans: No, income from putting up hoardings on top of the building shall be treated as income from other sources and not income from House property.

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Can I claim deduction of some maintenance charges paid?

No, you can not claim deduction for payment of maintenance charges e.g. security charges, lift charges, common electricity charges, etc. as a deduction.

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What is the annual value of a property which remains vacant for the whole year?

Q: If a property remains vacant for the whole year, what is the annual value of such property and how it is charged to tax?

 

Ans: The annual value of a property which remains vacant for the whole year is NIL. Deduction of municipal taxes should not be taken for the purpose of calculating Net Annual Value.

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What is the annual value when a property is self occupied during vacancy?

For a property self occupied during vacant period, self occupancy is to be ignored and Gross Annual Value shall be calculated treating it as a fully let out property. The annual value shall be higher of the actual rent, which is proportionate rent for the rented period and the expected rent.

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How is expected rent calculated?

Expected rent is higher of the

  1. Municipal valuation
  2. Fair rental value, subject to not exceeding the standard rent.
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What is the treatment of unrealized rent?

Unrealized rent for the current year is deducted from the Annual rental value.

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Can I claim deduction of interest on borrowed capital on accrual basis?

Yes, deduction of interest on loan is allowed on accrual basis even if the books of accounts are maintained on cash basis. It is immaterial whether the interest has been actually paid or not during the year.

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Can I claim deduction for interest on late payment of interest on loan?

No, you can not claim interest on late payment of interest as a deduction.

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Can I claim the deduction for the interest paid on new loan taken?

Q: Can I claim the deduction for the interest paid on new loan taken for the purpose of repayment of the initial loan?

 

Ans: You can claim the deduction for interest on second loan only if it can be proved to the satisfaction of the assessing officer that the second loan has merely been taken to repay the initial loan.

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Can I claim deduction for brokerage or commission paid for arrangement of loan?

No, brokerage or commission paid for the arrangement of loan can not be claimed as deduction.

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How is interest of preconstruction period calculated?

The interest accumulated from the date of borrowing till the end of the year preceding the year in which the construction is completed or actual possession of the property, the interest so accumulated shall be the interest for the preconstruction period.

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What is amount of deduction available in case of Preconstruction period interest?

The amount of interest accumulated from the date of borrowing till March 31 of the year preceding the year of completion or possession shall be allowed as deduction in five equal installments, starting from the year in which the possession is received or the construction is completed.

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How is Annual value determined in case of self occupied property?

Annual value of a self occupied property is nil.

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What is treatment of property vacant due to employment outside?

Q: If my property is vacant due to myself being employed outside, will it be considered vacant property or self occupied property?

 

Ans: If your property is vacant due to employment reasons, it shall be treated as self occupied property.

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What is the annual value of a wholly vacant property?

Annual value of a vacant property is nil.

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Can all assessees avail the benefit of exemption for self occupied property?

No, the benefit of exemption of self occupied property is available only to individuals and HUFs.

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What is tax treatment in case of multiple self occupied properties?

Q: I have four self occupied properties and last year I treated one property as self occupied. Can I treat any other property as self occupied this year for minimizing my tax liability?

 

Ans: Yes, this year you can treat any other property as self occupied and others as deemed to be let out.

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What is the annual value in case of many self occupied residential units?

Q: What is the annual value in case of a person having a property with many self occupied residential units?

 

Ans: Annual value of a property with many self occupied residential units shall be taken as NIL.

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What is the treatment of rent free accommodation given by employer?

Q: My employer has given a house property as rent free accommodation to me as a perquisite. What is the treatment of such house property in my hands?

 

Ans: Since you are staying in the house as an employee of the company and not as the owner of the property, such house property shall be treated as a let out property in your hands and not as a self occupied property.

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If I have a self occupied property, can I get the benefit of standard deduction?

If you have a self occupied property, Gross Annual Value (GAV) of such a property is NIL. So, you cannot get the benefit of standard deduction which is 30% of Net Annual Value (NAV).

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Can I claim deduction if I have borrowed money for repairs or renovation?

Yes, if you have borrowed money for repairs or renovation of a self occupied property, you can claim deduction for interest of an amount up to Rs. 30,000.

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Is there any limit on amount which I can claim as deduction for interest?

No, there is no limit. You can claim the entire amount of interest on borrowed capital for a let out or deemed to be let out property as deduction (including the amount if any for preconstruction period).

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Is there any limit on amount of deduction for interest for a let out property?

No, there is no limit. You can claim the entire amount of interest on borrowed capital for a let out or deemed to be let out property as deduction (including the amount if any for preconstruction period).

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What is maximum amount of deduction for interest for a self occupied property?

For a self occupied property:

  1. If you have taken loan on or after 1-4-1999 for the purpose of acquisition or construction of a property, the maximum deduction for interest on loan is Rs.1,50,000.
  2. If you have taken loan before 1-4-99 or loan for repairs or renovation, the maximum amount of deduction for interest on loan is Rs. 30,000.
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What should be ownership status in case of rent received from earlier years?

Q: I have received rent for some earlier years; do I necessarily need to be the owner of property for the purpose of chargeability of tax?

 

Ans: If you have received rent for some earlier years, it will be treated as income of the year in which it is received and shall be charged to tax, irrespective of the ownership of the property.

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What is maximum amount of deduction of interest for jointly owned property?

Q: I have a property which is jointly owned by two persons, and is self occupied by each of us. What is the maximum amount of deduction of interest on loan which can be claimed for such jointly owned property?

 

Ans: Each co-owner can separately claim a deduction of interest on loan to the maximum of Rs.1.5 lakh or Rs.30,000 in other cases.

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Can co-owners be regarded as Association of persons (AOP) in respect of a property?

The co-owners shall not be assessed as AOP if their respective share in the property is defined and ascertained. The income from such property is assessed in the hands of each co-owner separately.

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Can Net Annual value be negative?

Net Annual Value can be negative only when taxes paid are more than Gross Annual Value.

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Can I have a loss under house property?

Yes, you can have a loss under house property if deductions (i.e. standard deduction and deduction for interest on borrowed capital) are more than Gross Annual Value.

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What is maximum amount of loss which I can show for a self occupied property?

Q: What is the maximum amount of loss which I can show for a self occupied property, if such property is bought or constructed with borrowed capital?

 

Ans: If you have a self occupied property, the maximum amount of loss which you can show under “Income from house property” is Rs. 1.5 lakh, if loan is borrowed on or after 1-4-1999 and construction is completed within 3 years of taking the loan.

 

OR Rs. 30,000 in other cases.

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Can I have loss for a property which is fully or partly let out?

Yes, you can have loss for a property which is fully or partly let out if such property is bought or constructed with borrowed capital. Since there is no limit for deduction of interest on loan, any amount of loss can be shown for a property which is partly or fully let out.

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Can I claim any deduction on unrealized rent?

Q: Can I claim standard deduction or deduction of interest on borrowed capital or any other deduction on unrealized rent?

 

Ans: No, you cannot claim standard deduction or interest on borrowed capital as deduction from unrealized rent.

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What amount of rental arrears received is taxable under House Property?

Q: If I receive some arrears of rent, what amount of such arrears received is chargeable as income under House Property?

 

Ans: The amount received as arrears shall be taken as income chargeable under House Property after making a deduction of 30% on the amount received.

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Can I be allowed to claim interest paid to tenant as deduction?

Q: If I pay interest to tenant on the deposit made by him due to not handing over of possession in time, can I be allowed to claim such interest as deduction?

 

Ans: No, you can not claim the deduction for amount of interest paid to the tenant on the deposit made by him due to delayed handing over of possession to him.

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What is tax treatment of company owned property used by director as residence?

Q: If a property is owned by a company and used by the director as his residence, can such property be assessed under house property?

 

Ans: No, a property cannot be assessed under house property if it is used by the company for the residence of the director. Although no business is carried on in the house property, such occupancy shall be considered for the purpose of business itself.

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Do I necessarily need to register my sale deed to be an owner of property?

If you have taken the possession of the property after the payment of full consideration but you have not registered your sale deed, you are not considered as the owner but a deemed owner of the property till the sale deed is registered.

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How will rent from let out of a shopping complex to a bank be taxed?

Q: If I let out a part of a shopping complex-cum-lodging to a bank, will the rent received be taxed under business or under House Property head?

 

Ans: Rent received by you is in the capacity of the owner of a shopping complex, which was constructed for the purpose of being let out. So, the rent received shall be taxed under House Property and the purpose for which the tenant is using the property shall be ignored.

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If I use a property for Business, can it be taxed under House Property?

No, such property will be assessed under the head business and profession. The deduction of notional rent will not be allowed. Notional rent here means the rent which could have been derived had the property been let out. However, deduction of Interest on capital can be claimed under the head business and profession.

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How should I treat composite rent if additional benefits are inseparable?

If you receive composite rent which includes payment for usage of assets / additional services provided by you, and where letting of a property is not possible without additional facilities, such income after excluding the expenditure is taxable either as Income From Other Sources or as business income. Even if the amount of rent has been separately fixed for assets and facilities, such income cannot be shown under house property.

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How should I treat composite rent if the additional benefits are separable?

If you receive composite rent which includes rent for usage of assets /some additional services provided by you and where letting of a property is possible even without additional services, the rent of such property shall be taken under House Property. The rent of additional benefits shall be taken either as Income From Other Sources or as business income. For example, if the rent includes rent for Television, , rent for it can be taken under Income From Other Sources and rent of house under House Property.

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What is tax treatment of rent from a property constructed on leasehold land?

Q: I receive rent from a property constructed on leasehold land. Can such income be taxed under House Property?

 

Ans: Yes, rent received from a property constructed on leasehold land shall be taxed under house property as the property can be sold, transferred, mortgaged during leasehold.

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Can I set off loss under House Property against any other income?

Q: Can I set off loss under House Property against any other income and carry forward the balance loss, if any?

 

Ans: Yes, loss under House Property can be set off against any other head of income in the same year. If there is still some loss that is not completely set off during the year, such balance loss can be carried forward to the next year. In the next year, such loss under house property can be set off only against income under House Property. Loss under house property can be carried forward for a maximum of eight years.

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What is status of property purchased from joint financial resources?

Q: I have purchased a property using the joint financial resources of me and my wife. Can this property be treated as my property only?

 

Ans: No, the property will be treated as a joint property. Rent received will be your separate incomes according to the proportion of your individual contribution. Each of you will get the benefit of separate deduction for interest on capital.

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What is tax treatment of rent arrears if I am not the owner anymore?

Q: I have received arrears of rent. But I am not the owner of the property anymore. Will I be charged to tax under house property?

 

Ans: Yes, if you have received some arrears of rent during the year, these shall be charged to tax under house property in the year of receipt after deduction of 30% on the amount received. This is applicable even if you are not the owner of the property at the time of receipt of these arrears.

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Can interest payable outside India be allowed as deduction?

Yes, interest payable outside India will be allowed as deduction if TDS has been deducted.

 

If a person wants to avail benefit of interest on loan payable outside India then it is mandatory to deduct TDS; otherwise benefit of deduction is not available.

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What is ownership status if I transfer a property to my spouse?

Q: If I transfer a property to my spouse, without consideration, in pursuance of an agreement to live apart, would I be treated as the deemed owner of the property?

 

Ans: You shall not be treated as deemed owner of the property which is transferred in consequence of divorce or an agreement to stay apart, without receiving any consideration.

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Why is deduction of standard rent not available on unrealized rent?

Unrealized rent is deducted from the rent received or receivable for the purpose of calculating Gross Annual Value. Hence, it is not a part of Net annual value. Standard deduction is calculated at 30% of Net Annual value. Since unrealized rent is not a part of Net Annual Value, no standard deduction is available on unrealized rent. Though, unrealized rent not taxed earlier will form a part of income in the year in which this money is realized.

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Is actual receipt a prerequisite for taxability under house property?

Annual value of ownership is charged to tax under house property irrespective of whether any income is received or not. So, actual receipt of income is not a prerequisite for tax liability under house property.

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Can I be regarded as owner if I've authority to exercise rights on behalf of owner?

No, even if you have the authority to exercise rights, you cannot be regarded as the owner of the property. An owner is a person who can exercise rights in his own capacity and not on behalf of the owner.

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If I do not have the capacity to collect rent, can I be taxed?

If you have income from a property you will be charged to tax under House Property, irrespective of your capacity to let out or receive rent from such property.

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When can a lessee be regarded as an owner?

A lessee is an owner with rights to raise construction. Lessee shall be an owner if he has actually raised a new construction and is deriving income from it.

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Is registration of sale deed necessary for ownership?

Yes, registration of sale deed is necessary for ownership. Till the time deed is not registered, the person who is allowed to take the possession on payment of sale consideration is treated as deemed owner.

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Will staying in a club be treated as letting of a club to its members?

Q: If I stay in a club, of which I am a member, will this be treated as letting of a club to its members?

 

Ans: No, if you stay in a club being its member, this will not be regarded as letting of club to its members as you are enjoying the facilities as a member and not as a tenant.

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Can a person who receives rent on behalf of someone be regarded as an owner?

No, a person who receives rent only on behalf of someone can not be regarded as owner unless specified.

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Should letting precede vacancy for determining Annual value of property?

Q: Should letting precede vacancy for determining Annual value of property which is partly let out and partly vacant during the year?

 

Ans: There is no such sequence specified in the Act. For determining the annual value of a property which is partly let out and partly vacant during the year, vacancy and letting out just need to take place in the same year.

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Can I claim deduction for interest on loan taken by me to buy my wife's property?

Q: I have taken a loan in my name to buy a property which is in the name of my wife. Can I still claim deduction for interest on loan taken for such property?

 

Ans: If the property is purchased from your funds, or the loan taken for the purchase or renovation of a property is repaid out of your income, you can claim deduction for interest on borrowed capital even if the property is in the name of your wife or your minor child.

 

However, if your wife has her individual source of income which has been utilized for the purchase of property or for repayment of loan taken for such property, you cannot claim any deduction for interest on loan even if the loan is in your name.

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Can I claim deduction on interest paid for giving late possession?

Q: I am a builder and have paid interest for giving late possession of property. Can I claim the interest paid as deduction?

 

Ans: No, any interest paid by a builder as a penalty for delayed possession of property can not be claimed as a deduction by him.

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The unrealized rent can be deducted from the rent received for the purpose of calculating the Gross Annual value subject to certain conditions; out of which one is that the legal proceedings to get the property vacated has been started. The legal proceedings must have been executed so as to deduct the amount from the annual rental value. However, it is not necessary that the legal proceedings to get the property vacated have been terminated too.

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If a property is owned by me outside India, is income from such property taxable?

Whether any income is taxable in India or not depends upon the residential status of a person. If you are a resident or ordinarily resident, any income is taxable in India. If the income accrues or arises in India, such income will be taxed under House Property, even if the property is owned outside India. If a property is situated outside India, municipal taxes levied by foreign local authority are allowed as deduction if they are paid by the owner during the relevant year.

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How can I find out if my property is covered under Rent Control Act?

If a particular property comes within municipal limits prescribed, then the said property is covered under Rent Control Act.

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Can rental income of a vacant plot not attached to a building be charged to tax?

No, the rental income of a vacant plot not appurtenant to a building cannot be charged to tax under income from house property. Only those lands which are appurtenant to property are charged to tax under income from house property.

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If municipal taxes are borne and paid by my tenant, can I claim deduction?

Q: If the municipal taxes are borne and paid by my tenant as per the terms of rent agreement, can I still claim the deduction?

 

Ans: No, if your tenant has borne and paid any municipal taxes, you cannot claim deduction for municipal taxes. You can claim the deduction of municipal taxes which have been paid by you during the year.

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Can I claim deduction for municipal taxes paid for a partly vacant property?

You can only claim proportionate deduction in respect of municipal taxes paid for a partly vacant property.

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Do I need to include non refundable deposit as a part of rent received?

Q: I have received a non refundable deposit from a tenant. Do I need to include this as a part of rent received?

 

Ans: Any non refundable deposit received by you from a tenant shall be included in the rent received on pro rata basis. However, refundable security shall not be included in the rent received.

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What is the tax treatment of advance rent received?

Q: I have received advance rent for two months from my tenant. Do I need to include such advance rent as rent received for the purpose of calculating income from house property?

 

Ans: Advance rent received shall not be included in the rent received / receivable in the year of receipt for being charged to tax under income from house property.

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Can I claim payment of stamp duty as a deduction from rent received?

Q: I have paid stamp duty for the preparation and registration of lease deed. Can I claim such payment as a deduction from the rent received?

 

Ans: No, payments of stamp duty for the preparation and registration of sale deed can not be deducted from the rent received.

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Can I get deduction for principal and interest payment on loan from a friend?

Q: I have taken a loan from a friend along with the loan from bank to purchase a house property. Can I get the deduction for principal and interest payment on loan from the friend?

 

Ans: As regards to loan from the bank, you can claim deduction for repayment of loan under section 80C and for interest on loan under section 24. For loan taken from a friend, you can get the deduction for principal repayment under section 80C, but not for interest on loan under section 24.

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What are circumstances when rental income is charged as income from business?

Rental income from a property is charged as income from business in the following cases:

  1. When letting of a property is incidental to the main business e.g. letting of residential flats to the employees
  2. Hiring of a complex e.g. furnished paying guest accommodation, well equipped theatre
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How can I calculate Gross Annual Value of a property which is let out?

In order to compute Gross Annual Value, you need to calculate:

  1. Expected rent - which is higher of fair rent and municipal value subject to a maximum of Standard rent.
  2. Actual rent received or receivable after deducting unrealized rent
  3. Find out higher of (1) or (2)
  4. Calculate loss due to vacancy
  5. GROSS ANNUAL VALUE= (3)-(4)
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Where will income of quarters let out by employer to employees be taxed?

Q: An employer builds quarters for residential use by his employees and the letting of these quarters is incidental to his business. Where will the income of such property be taxed?

 

Ans: The income from such property is taxable under income from business and not under income from house property as this property is considered to be used by the owner for his business.

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U/s 54EC what is the amount that I need to invest– sale value or capital gains?

Q: For claiming exemption under section 54EC what is the amount that I need to invest –sale value or capital gains?

 

Ans: If you want to claim exemption under section 54EC, you need to invest amount only up to the extent of capital gains and not the sales consideration in the bonds of NHAI or REC.

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Can I get exemption under section 54 and 54EC simultaneously?

Yes, you can claim exemption under section 54EC along with any exemption u/s 54 or 54F, 54B.

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How can I reduce my tax liability on long term capital gains from sale of land?

If you have any long term capital gain from sale of land, tax can be saved if :

  1. You invest in the bonds of NHAI and REC within 6 months from the date of sale and claim exemption under section 54EC, OR
  2. You invest in a residential house property within 1 year before or 2 years after or construct 3 years after the date of sale and claim exemption under section 54, OR
  3. If the capital asset sold is other than a residential house you can claim exemption under 54F if you purchase a residential house property within 1 year before or 2 years after or construct 3 years after the date of sale, OR
  4. You invest in agricultural land and claim exemption under 54B provided the land transferred has been used for agricultural purpose either by you or your parents for 2 years before the date of transfer.
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Can I claim exemption under section 54EC on sale of Right in property?

Right in a property is a capital asset.Exemption under section 54EC can be claimed on transfer of any kind of capital asset. So even sale of a right in property shall be considered as a sale of capital asset and you can save tax on such transfer by investing in the bonds of REC and NHAI provided there is a long term capital gain from the transfer of such asset.

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When can I claim exemption under section 54EC?

Exemption under section 54EC can be claimed if you earn long term capital gain from the transfer of any kind of capital asset.

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What should I do to claim exemption under section 54EC?

You need to buy the bonds issued by REC or NHAI within 6 months from the date of transfer of the asset to claim exemption under section 54EC. The exemption is limited to Rs 50 lakh p.a.

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What is the maximum amount that can be exempt under 54EC?

You can invest up to Rs 50 lacs during the financial year in the bonds of NHAI or REC and claim exemption under 54EC. The amount of exemption shall be either the amount invested in such Bonds within 6 months from the date of sale or amount of long term capital gains whichever is lower. You need to pay tax on long term capital gain that is above Rs 50 Lacs.

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When can exemption claimed u/s 54EC taken as my taxable income?

The exemption claimed u/s 54EC taken as your taxable income:

  1. If you sell /transfer the bonds within 3 years from the date of its acquisition,
  2. If you take loans by keeping such bonds as security,

The amount of capital gain which was exempt earlier shall be deemed to be the taxable long term capital gain of the financial year in which such bonds are transferred or loan is taken against the security of such bonds.You need to pay tax on the short term capital gain as well on the transfer of bonds.

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Can I purchase 2 houses and claim exemption u/s 54F to save LTCG?

Q: Can I purchase 2 house properties and claim exemption under section 54F to save Long term capital gain?

 

Ans: No, you can not claim exemption under section 54F for 2 houses purchased or constructed.

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When can I claim exemption under section 54F?

You can claim exemption under section 54F if all the following conditions are satisfied:

  1. You have earned a long term capital gain.
  2. You have sold an asset other than a residential house.
  3. You have made an investment in buying or constructing a residential house.
  4. You have purchased the house within one year before the sale of asset on which long term gain has arisen, or you have purchased the house within two years after the sale of asset on which long term gain has arisen, or you have constructed the house property within 3 years from the date of transfer of original asset,
  5. You do not own more than one residential house at the time of purchase or construction of a new house.
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Can I claim exemption u/s 54F for multiple houses and within what time?

Q: I have sold the land and invested in two residential house properties. Second house property was purchased six months after the date when Long Term Capital Gain was invested in first residential house property. Can I claim exemption under section 54F for both the houses purchased?

 

Ans: As per section 54F, you can neither purchase nor construct any residential house other than the new asset with in 2 years or 3 years respectively from the date of transfer of the original asset. You can claim exemption under section 54F for only one house purchased. If you purchase or construct another house within 2 years or 3 years amount of capital gain which was exempt earlier shall be treated as your long term capital gain even if no capital asset has been transferred during the year.

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Can I claim exemption under section 54 for four flats?

Q: I have a house in Delhi. If I sell that house and out of the sales consideration received, I have purchased 4 flats. Can I claim exemption under section 54 for all the four flats?

 

Ans: Yes, you can claim exemption under section 54 for more than one house property purchased or constructed after the date of transfer of the original asset. Any long term capital gain from the transfer of a residential house which was charged to tax under income from house property is exempt under section 54 if amount equal to or less than the Long Term Capital Gain from such transfer is invested either in purchase of a residential house property within 1 year before or 2 years after the date of transfer of the original asset or invested in construction of a residential house property within 3 years after the date of transfer of the original asset.

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What is the time limit for construction of house to claim exemption u/s 54 or 54F?

To claim exemption under section 54 and 54F construction of a new house property must be completed within 3 years from the date of transfer. Date of commencement of construction is irrelevant. However on the basis of some court decisions , higher judicial authorities does not deny from giving exemption even if the construction of a house property is not completed within 3 years from the date of transfer on the belief that most of the sales consideration have been spent for construction and only some part of it is left.

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Can I claim exemption u/s 54, 54F for purchase of land?

Q: If I purchase land out of the proceeds of long term capital gain from the transfer of asset, can I claim exemption under section 54 or 54F?

 

Ans: No, for claiming exemption under section 54 or 54F, you need to purchase a residential house within 1 year before or 2 years after the date of transfer or construct a residential house within 3 years after the date of transfer of the original asset.So if land is purchased, you can not claim exemption under section 54 or 54F.

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If I sell my agricultural land, do I need to pay taxes?

Rural agricultural land situated in India is not a capital asset. So you need not pay any tax on the transfer of such rural agricultural land. However if you transfer any urban agricultural land whether situated in India or outside India, you have to pay tax on the capital gain arising from the transfer of such urban land.

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Can I claim exemption u/s 54B on transfer of urban agricultural land?

Q: When can I claim exemption under section 54B from capital gain on transfer of urban agricultural land? What is the amount of exemption that can be claimed under section 54B?

 

Ans: Exemption under section 54B can only be claimed by an individual. So

  1. You can claim this exemption only if urban agricultural land transferred is used by you or your parents for agricultural purpose during 2 years immediately before the date of transfer of such agricultural land. And
  2. You have purchased another agricultural land whether rural or urban to be used for agricultural purpose within 2 years from the date of transfer of original agricultural land.

The amount of exemption is equal to the amount invested in the purchase of new agricultural land subject to the amount of capital gain.

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What is the tax liability if agricultural land is sold within 3 years of purchase?

Q: I have sold the new agricultural land within 3 years from the date of its purchase. The new land is an urban agricultural land. What is the tax implication?

 

Ans: If the new urban agricultural land purchased is transferred within 3 years from the date of it’s purchase, the amount of capital gain exempt earlier shall be reduced from the cost of the new agricultural land for the purpose of computing tax on short term capital gain. However if the new land purchased is a rural agricultural land such withdrawal of exemption is not applicable.

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What is the tax liability if new rural agricultural land is sold ?

Q: I have sold the new rural agricultural land within 3 years from the date of its purchase. What is the tax implication?

 

Ans: If Rural agricultural land is purchased out of the proceeds of capital gain from sale of urban agricultural land, there will be no capital gain even if such rural agricultural land is sold within a period of 3 years from the date of it’s acquisition. There will be no effect on the capital gain as well which was exempt earlier.

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How to avail exemption without purchasing asset in respective time period?

Q: I have sold an urban agricultural land but I could not find another suitable agricultural land. What should I do to save tax?

 

Ans: If capital gain arising (whether long term or short term) from the transfer of an urban agricultural land could not be invested by you in another agricultural land to be used for agricultural purpose you have the option to deposit the amount in the capital gain deposit account scheme of any bank before the due date of filing the return of income for the year in which original agricultural land is transferred. You can utilize the amount so deposited for purchase of another agricultural land within 2 years from the date of transfer of original agricultural land. You can claim exemption for the amount deposited in the capital gain deposit account scheme.

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How can I save tax on capital gain from the sale of a residential house?

To save tax on capital gain from the sale of a residential house, you need to purchase another residential house within 1 year before or 2 years after the date of transfer or construct another residential house within 3 years after the date of transfer and claim exemption under section 54 if all the other conditions are satisfied.

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What amount shall be invested to claim exemption u/s 54 F?

You can claim exemption u/s 54F if either entire or a portion of the net sales consideration received from the transfer of any asset other than a residential house property is invested either in the purchase or construction of a new house property within the prescribed time limit.Net sales consideration means sales consideration as reduced by cost of sale such as brokerage on sale etc.

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What amount shall be invested to claim exemption u/s 54 ?

You are required to invest in a residential house property only up to the extent of capital gains and not the entire or a portion of sales consideration.

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Can I claim exemption for a commercial house property u/s 54?

No, To claim exemption under section 54 you need to invest in a residential house property and not in a commercial house property. If you buy a commercial house property you can not claim exemption under section 54.

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Can I adjust short term capital loss first against LTCG instead of STCG?

No, short term capital loss needs to be adjusted against short term capital gain first. Only balance amount of short term capital loss can be adjusted against Long Term Capital Gain.

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Whether conversion of debentures in to shares shall be treated as transfer?

Conversion of debentures in to shares shall not be treated as transfer and hence no capital gain shall arise.

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Can I claim exemption under section 54F if the new house is let out?

Even if the new house is let out in the year of purchase, you can claim exemption under section 54F.

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What is enhanced compensation?

If you are not satisfied by the amount of consideration received for compulsory acquisition under any law, you may appeal against the amount received.Any additional compensation received on the basis of your appeal, shall be treated as enhanced compensation.

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What is the tax implication on zero coupon bonds?

Any long term capital gain on sale of zero coupon bonds shall be charged to tax at minimum of the following:

  1. 20% of LTCG After indexation of cost of such bonds
  2.    OR
  3. 10% of LTCG before indexation of cost of such bonds
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Can I claim exemption u/s 54 if I purchase a house property in foreign country?

Yes, you can claim exemption under section 54 even if you purchase a house property outside India. Section 54 applies to both residents and non residents. Section 54 requires you to only purchase a house property and not to purchase a house property in India only.

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Can I claim exemption for construction of a floor in the house u/s 54?

Q: To avoid capital gain tax, can I use the amount of capital gain earned on sale of a property for construction of a floor in the house?

 

Ans: Yes, you can claim exemption by investing the amount of capital gain on construction of a floor in the house. Provided that long term capital gain arises from the sale of any residential house only and the amount of capital gain is invested in the purchase of another residential house. Construction of a floor in the house shall be deemed to be invested in the purchase of a new residential house.

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How can Cost Inflation index saves tax on capital gain?

Income Tax Act provides for inflating cost of acquisition of an asset by applying Cost inflation index. If cost of acquisition is increased, amount of capital gain will reduce which will automatically reduce tax on capital gains.

 

Capital Gain is computed as:

 

Sales consideration - Indexed Cost of acquisition = Long Term Capital Gain

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Can I claim exemption u/s 54B only if I have a long term capital gain?

No, exemption under section 54B can be claimed whether you have long term or short term capital gain.

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Can I deposit unutilized amount in CGAS to claim exemption u/s 54EC?

Q: If I am not able to utilize some amount of capital gains to buy Bonds of REC or NHAI, Can I deposit the unutilized amount in Capital Gain deposit Account Scheme of a bank to buy these bonds later?

 

Ans: No. If you want to claim exemption under section 54EC, either you have to buy Bonds in the same year within 6 months from the date of transfer of the asset or you have to claim exemption under any other section by making some other form of investment. For the purpose of claiming exemption under section 54EC by purchasing bonds of REC or NHAI, unutilized amount of capital gains can not be deposited in Capital Gain deposit Account Scheme of a bank.

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Can I set off losses under capital gains?

Yes, losses under capital gains can be set off as following :

  • Short term capital loss can be set off against short term capital gain and balance if any can be adjusted against Long term capital gain.
  • Short term capital loss can not be set off against any other income.
  • Unadjusted short term capital loss can be carried forward for 8 assessment years.
  • Long term capital loss can be adjusted only with long term capital gain and balance if any can be carried forward for 8 years.
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Can Long Term Capital loss be carried forward?

Yes, Long term capital loss can be carried forward for 8 years.

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Can Securities Transaction Tax be treated as a part of cost of acquisition?

Q: Whether Securities Transaction Tax is allowed as a cost of acquisition or purchase for the purpose of computing capital gain?

 

Ans: Securities Transaction Tax is not allowed as a cost of acquisition or purchase for the purpose of computing capital gain.

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What is an urban agricultural land?

Urban agricultural land is a land having a population of more than 10000 persons and which is situated within the limits of municipality at a distance of less than 8 kms. Population should be according to the last preceding census, figures of which have been published before the last day of the previous year.

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What is the rate of tax on Long Term Capital Gain?

Long Term Capital Gain is taxed @ 20%. If securities or units are sold, a person has the option to pay tax either @ 10% without indexation or 20% with indexation.

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Can house property be treated as capital asset for the capital gain purpose?

Yes, house property is a capital asset. Although it is being used for personal purpose but it can not be treated as personal effects as house property is an immovable property. Capital asset does not include stock in trade,Personal effects, rural agricultural land in India, Special bearer bonds, Gold deposit bonds, Gold bonds issued by the Central government.

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What are Personal effects?

Personal effects mean movable property including wearing apparel and furniture which is being held for personal use by a person or any member of his family dependent on him excluding jewellery, Archaeological collections, Drawings, Paintings, Sculptures or any other work of art.

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Whether Jewellery held for personal use is a personal effect?

Although jewellery is a movable property which can used for personal purpose but it is excluded from the purview of personal effect. For capital gain purpose jewellery is a capital asset. Archaeological collections, Drawings, Paintings, Sculptures or any other work of art are also treated as capital asset.

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What is the meaning of Short term capital Asset?

Any capital asset other than equity or preference shares, securities such as debentures listed on a recognized stock exchange , or Units of the UTI or units of Mutual Fund specified under section 10(23D), Zero coupon Bonds; which is held by a person for less than 36 months before the date of it’s transfer is a short term capital asset. (less than 12 months in case of equity or preference shares, securities such as debentures listed on a recognized stock exchange , or Units of the UTI or units of Mutual Fund specified under section 10(23D), Zero coupon Bonds.)

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How to calculate period of holding of the shares?

Q: If I transfer the shares of a company held by me on 31-5-2011, the Date of purchase of which is 30-1-2011. What is my period of holding of these shares?

 

Ans: The period of holding is 4 months i.e. from 30-1-2011 to 30-5-2011. For calculating period of holding you have to exclude the date of transfer. Hence short term capital gain shall arise on the transfer of these shares.

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What is the meaning of a Long term Capital asset?

Any capital asset which is held by a person for more than 36 months (12 months in case of equity or preference shares, securities such as debentures listed on a recognized stock exchange , or Units of the UTI or units of Mutual Fund specified under section 10(23D), Zero coupon Bonds) before the date of it’s transfer is a Long term capital asset.

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What is the meaning of transfer of a capital asset?

Transfer of a capital asset includes:

  1. Sale, exchange, relinquishment (Surrender) of the asset;
  2. Extinguishment of any rights in the asset (reducing any right on asset);
  3. Compulsory acquisition of an asset;
  4. Conversion or treatment of any capital asset into or as stock in trade of a business;
  5. Maturity or redemption of zero coupon bonds;
  6. Any other transaction which allows to take or retain the possession of an immovable property in part performance of the contract as per sec 53A of the transfer of Property Act;
  7. Any other transaction which has the effect of transferring or enabling the enjoyment of an immovable property whether by way of becoming a member, or acquiring shares in a cooperative society , company or any other association by way of any agreement or arrangement;
  8. If any capital asset is transferred by way of gift or will or inheritance, this shall not be treated as transfer;
  9. If asset transferred is not a capital asset, provisions of capital gain shall not apply.
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Is conversion of rural agricultural land into stock in trade a transfer?

Q: I am a person carrying business of real estate. I have a rural agricultural land. Such land is treated as stock in trade of my real estate business. Can this be treated as transfer by way of conversion of asset into stock in trade of a business?

 

Ans: No, it is not a transfer because if a capital asset is converted in to stock in trade of a business, such conversion can be treated as a transfer. Since rural agricultural land is not a capital asset, treatment of such asset as stock of business shall not be regarded as transfer.

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When do I need to pay tax on capital gain from transfer of converted assets?

Q: I am a person carrying on the business of jewellery. I had some personal jewellery which was not in use. So I have included that jewellery as stock in trade of my jewellery business in April 2009 which was actually sold in January 2011.When do I need to pay tax on the capital gain arising from the transfer of such converted asset?

 

Ans: You have to pay tax in the year in which such converted asset is actually sold. Although conversion of your personal jewellery into stock of business took place in the year 2009-2010 but capital gain / loss on such transfer shall be computed in the year 2010-2011. However for the purpose of computing long term capital gain if applicable, indexation will have to be done till the year of conversion i.e. year in which transfer took place.

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What is the calculation of capital asset converted into stock in trade?

Q: How is cost of acquisition calculated for a capital asset which is converted in to stock in trade of a business?

 

Ans: Fair market value is considered as the cost of acquisition of the asset which is converted into stock in trade, in the books of accounts of the business carried on by a person.

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On sale of converted capital asset, Do I need to compute business income/ loss?

Yes, you need to compute business income/ loss in the year of sale of a converted asset. Such Business income or loss shall be computed as:

 

Sales consideration of the converted asset - Cost of acquisition of the converted asset (i.e. Fair Market Value as on the date of conversion )

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What should be the sales consideration of a converted asset?

Q: What should be taken as the sales consideration of the capital asset which is being converted in to stock of a business for the purpose of computing Capital gain?

 

Ans: Fair market value on the date of conversion shall be considered as full sale consideration of a capital asset which is converted in to stock in trade for the purpose of computing Capital gain.

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What is the Fair market value of a capital asset?

Fair market value means the price at which the capital asset would normally be sold in the open market on that date.

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Can I purchase Capital gains tax savings bonds if I have short term capital gain?

Q: Can I purchase Capital gains tax savings bonds if I have short term capital gain from the sale of capital asset?

 

Ans: No, only Long Term Capital Gain from the sale of any kind of capital asset can be saved by investing in capital gains tax saving bonds.

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In what time can I save tax by investing in bonds?

Q: I sold my property in December 2010. Can I save tax by investing in bonds? What is the last date when I can invest in bonds?

 

Ans: Yes, you can save tax on long term capital gain from the sale of a property, if you invest in capital gains tax saving bonds up to June 2011. Long term capital gains up to Rs 50 lakh from the sale of capital asset can be exempted by investing in the Bonds of REC or NHAI provided such investment is made within 6 months from the date of transfer of the asset.

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What is the maximum amount that can be invested in bonds?

Q: On sale of an asset I have a long term capital gain of Rs 75 lacs. I want to invest the entire amount in Capital gains tax savings bonds. Can I do that?

 

Ans: You can invest in capital gains tax savings bonds up to Rs 50 lacs. So if you have a long term capital gain of Rs 75 Lacs, you can get exemption from tax for Rs 50 Lacs only. For balance Rs 25 lacs you have to pay tax @ 20%.

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Do I need to pay tax on income earned on capital gain tax savings bonds?

Yes, income arising on capital gains tax saving bond is taxable.

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What is the benefit of indexation?

When the sales consideration of an asset is more than it’s cost of acquisition, there is a capital gain on which you are required to pay tax. Since cost of acquisition of asset may become historical at the time of sale, indexed cost helps you to take into consideration the impact of inflation on the cost of your asset. When indexation is done you need to pay less tax on your long term capital gains.

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What is capital loss?

Where the cost of acquisition of an asset is more than the sales consideration received from the transfer of such asset, the difference between the two amounts is capital loss from such transfer.

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Can I set off capital loss against income from other sources?

Capital loss can not be adjusted against any other head of income.

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What is a rural agricultural land?

If the land is situated under municipality area where the population is less than 10000 persons or the distance from the municipality to the specified land is more than 8 KM, such land is a rural agricultural land. Rural agricultural land is not a capital asset and it’s sale does not attract capital gains.

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Can I adjust business loss against capital gain?

Q: I have long term capital gain by selling a shop. I am also running a boutique in another shop and sell stitched suits as well as fabric. Some fabrics were sold at a loss during the year. Can I adjust the capital gain against the loss incurred on sale of fabric?

 

Ans: No, you can not adjust loss from sale of fabric held as stock in trade of a business as it is a business loss and business loss can not be adjusted against capital gain.

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Can capital gain from sale of agricultural land, be exempt by purchasing a house?

Q: I have sold an agricultural land which is just 5 kms from the municipal area. Is profit from sale taxable? Can I save tax by purchasing a residential property?

 

Ans: Yes, you have to pay tax. The land is situated at a distance of less than 8 kms, so such land is an urban land which is a capital asset and sale of capital asset will attract capital gain provided such land is being used for agricultural purpose for at least 2 years before the date of transfer. You can not save tax on sale of agricultural land by investing in a residential property. Any capital gain from the sale of agricultural land can be exempt only by investing in another agricultural land used for agricultural purpose, within 2 years from the date of transfer of original agricultural land.

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Is rural agricultural land not used for agricultural purpose, exempt from tax?

Q: I have sold a land which is situated 10 kms away from municipal limits and the population of the area is around 8500 persons. This land is not being used for agricultural purpose. Can I get exemption from tax for this land?

 

Ans: Rural agricultural land whether or not used for agricultural purpose is exempt from tax. So capital gain earned by you from the sale of rural agricultural land is exempt.

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I have sold a land. Will it be taxed?

Sale of Non agricultural land will attract capital gain. You will have to pay tax on such capital gain if amount of capital gain or sales consideration is not reinvested. Sale of agricultural land will attract capital gain only if it is an urban agricultural land. Rural agricultural land is exempt from tax.

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Is tax on capital gain dependent on the period for which an asset is held?

Yes, Tax on capital gains depends on the period of holding.Tax on Long term capital gain is 20% on shares on which Securities Transaction Tax has been paid. Short term capital gain is taxed at normal rates except for securities which are taxed at 10% provided Securities Transaction Tax has been paid.

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Whether cost of acquisition shall be taken as NIL if the asset is gifted/ inherited?

No. Where the asset has either been inherited by you through will or gifted to you, the cost of acquisition shall be the cost at which the previous owner acquired such an asset. Cost of acquisition should be increased by any cost of improvement incurred or borne either by you or the previous owner.

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Can exemption u/s 54F exceed the amount of long term capital gain?

No. Exemption under section 54F can not exceed the amount of long term capital gains. Although you can either get exemption of entire LTCG if you invest your entire net sales consideration in another residential house property, OR you can get proportionate exemption for the amount invested in the new house where only a part of net sales consideration is invested.

 

The amount exempt shall be calculated as: LTCG * Amount invested/Net sales consideration.

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Can I claim exemption u/s 54B if I purchase a rural agricultural land?

If You purchase another agricultural land whether in rural or urban India within 2 years from the date of transfer of the original agricultural land, you can claim exemption under section 54B.

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Can I claim the cost of land also as cost of construction?

Cost of Land is a part of cost of construction for claiming exemption under section 54 and 54F.

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What does construction mean for the purpose of claiming exemption u/s 54 or 54F?

Construction includes not only new construction but also the cost of remodeling of a property.

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Whether allotment of flat by a cooperative society , treated as construction?

Q: Whether allotment of flat or a house by a cooperative society of which I am a member, treated as construction? Whether I can claim exemption for such house even if the construction is not completed within 3 years from the date of transfer of original asset?

 

Ans: Yes. Such allotment of flat shall be considered as construction. You can claim exemption even if the construction of the flat allotted by a cooperative society or DDA is not completed within 3 years from the date of transfer of the original asset.

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Whether capital gain on compulsory acquisition of urban agricultural land exempt?

Q: Whether capital gain on the compulsory acquisition of urban agricultural land exempt?

 

Ans: Yes, full capital gain on compulsory acquisition of urban land is exempt. Provided :

  1. You are an individual;
  2. You own a land in urban area;
  3. Such land was being used for agricultural purpose for a period of 2 years before the date of transfer either by you or your parents;
  4. Such land is transferred by way of compulsory acquisition under any law;
  5. You have received consideration for such transfer on or after 1-4-2004.
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Can I claim exemption in full even if the new house is partly purchased?

Q: Can I claim exemption in full even if the new house is partly purchased or partly constructed?

 

Ans: Yes, you can claim exemption.It does not matter whether the new house is partly purchased or partly constructed.

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Can future and options loss be adjusted with capital gains?

Future and options are business activity so gain or loss from such activities shall be treated as business gain or loss. So business loss on future and options can be adjusted with capital gains.

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Whether income on capital gains deposit account scheme of a bank is taxable?

Yes, interest received on amount deposited in capital gains deposit account scheme of a bank is taxable on accrual basis every year. This interest is shown as income under income from other sources.

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When house property shall be considered transferred?

Q: A sells house property to B as per sale deed dated 23rd May 2010. B paid the consideration and takes the possession of such house on 2nd June 2010. Sale deed is not yet registered. When will such sale be considered as transfer?

 

Ans: On sale, if a person has paid the money and taken the possession of the property, such sale shall be considered as transfer in the year in which such possession is taken even if the documents are not registered.

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Can I make investment in the bonds of NHAI or REC in joint name with my son?

Yes. You can claim exemption under section 54EC even if you invest in these bonds in joint name with your son.

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Can I claim exemption u/s 54EC and 54F on transfer of depreciable assets?

Yes, exemption under section 54EC and 54F can be claimed even for depreciable assets provided these are held for more than 3 years.

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What to do with amount withdrawn from CGAS but not utilized within 60 days?

If you are not able to utilize the amount within 60 days of it’s withdrawal, the amount withdrawn should be redeposited in the account.

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Who is a previous owner?

Q: A house is owned by me. I inherited this house from my father. This house was actually purchased by my grandfather in the year 1954 for a price of Rs 10 lakh. Who shall be considered as previous owner-My father or my grandfather?

 

Ans: Previous owner does not mean a person who owned an asset before such asset was held by you, but it means a person who actually paid price to acquire the asset. In your case, house which is owned by you was actually purchased by your grand father. So your grand father shall be treated as previous owner.

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What is the time limit for investment in case of compulsory acquisition?

Q: What is the time limit for investment in another residential house property in case of it’s compulsory acquisition?

 

Ans: In case of transfer by way of compulsory acquisition by the government the period of 1 year or 2 year or 3 year for acquiring of the property whether by purchase or by construction shall start from the date of receipt of compensation and not from the date of acquisition. Deposit in Capital Gain deposit Account Scheme can be made in the previous year in which compensation is received or till the due date of filing the return of income of the previous year in which compensation is received.

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Can I claim deductions u/s 80C to 80 U from Long term capital gain?

No, deductions under section 80C to 80U are not available from Long term capital gains.

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What is the meaning of listed securities?

Listed securities means any securities listed in any recognized stock exchange in India.

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What are the tax implications on transfer of equity shares on which STT is paid?

Q: I have some equity shares in a company along with some units of an equity oriented fund. These securities are transferred through a recognized stock exchange in India and are subject to STT. What are the tax implications on such transfer?

 

Ans: Short term capital gain on transfer of such securities which are transferred through recognized stock exchange on which STT has been paid is calculated @ 15%. No deductions under section 80C to 80U are allowed on such capital gains.However if your total income without including STCG is less than the maximum exempt limit , you can claim exemption of the balance amount from the STCG. Balance amount of STCG shall be taxed @ 15%.

 

If such shares are held for more than 12 months, long term capital gain on transfer of such securities are exempt from tax.

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Can I claim exemption u/s 54F if I purchase a house in a foreign country?

No. If any capital asset other than a residential building is transferred and a residential property is purchased outside India to save tax, You can not claim exemption under section 54F.

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Can I claim exemption u/s 54F for repayment of Home Loan?

Q: If I sell a property and use the sale proceeds to pay off the Home Loan taken for purchase of a residential house, whether I can claim exemption under section 54F?

 

Ans: Exemption under section 54F can be claimed if the sale proceeds are utilized within one year before or 2 years after the date of transfer. So where a house is bought one year before the date of transfer by taking loan and you sell your house property within one year and uses the amount to pay back the loan, such repayment should be taken as fulfilling the condition of using the sale proceeds.

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Whether silver utensils can be treated as capital assets?

Silver utensils which are held for use in the kitchen or in the dining room are treated as personal effects and not capital assets. However silver bars, sovereign, bullion and silver coins are not treated as personal effects and hence these are capital assets.

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Can wearing apparels be considered as capital asset?

Wearing apparel is treated as a part of personal effects. So these are not capital assets which will attract capital gain on their transfer.

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Whether car held by me shall be treated as a capital asset?

Car which is held and used by you for your personal use shall be treated as a personal effect and not a capital asset. Personal effects does not attract capital gain on their sale.

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Whether agricultural land situated outside India is a capital asset?

Agricultural land whether rural or urban situated outside India is a capital asset. Any transfer of such agricultural land shall attract capital gains tax. Rural agricultural land situated in India is exempt from capital gain tax.

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From what date do I start earning interest from Capital Gain deposit Account?

Q: What shall be the date from which you start earning interest on the amount deposited in the Capital Gain deposit Account Scheme?

 

Ans: You will start earning interest from the date on which the cash is received or cheque is realized by the bank.

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Whether interest earned on CGAS of a bank is taxable on accrual basis?

Yes, interest earned on Capital gains account scheme of a bank is charged to tax on accrual basis.

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Can I claim exemption u/s 54 and 54F if new purchased property was not registered?

If you have purchased a house and acquired it’s possession and control, you can claim exemption even if such purchase is not registered under the Registration Act, 1908.

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What is the period of holding of a flat allotted in a housing Scheme?

Q: What is the period of holding of a flat allotted in a housing Scheme, From the date of allotment or date of possession of such flat?

 

Ans: Period of holding of a flat which has been allotted to you shall be considered from the date of allotment and not from the date of possession.

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Whether Redemption of bonds constitutes transfer?

Redemption of bonds shall be treated as transfer, as consequent to redemption there is extinguishment of a right in the asset and a person receives consideration as well for surrender of his right in such an asset.

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Whether redemption of mutual fund scheme constitutes transfer?

No, redemption of mutual funds scheme does not constitute transfer, and hence there is no capital gain.

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What is the meaning of exchange in respect of a capital asset?

Exchange of an asset is a transaction involving two persons who transfer the ownership of an asset in lieu of ownership in other asset. It means exchange of assets held by them without money being involved. Exchange of assets includes both moveable and immovable assets.

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What is the meaning of Relinquishment?

Relinquishment means that a person has surrendered his rights in an asset voluntarily for consideration, and consequently has ceased to own the asset but asset continues to exist.

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What is the meaning of extinguishment?

Extinguishment means destruction or extinction of any right of a person in the capital asset not voluntarily but on account of damage to or destruction of capital asset due to following circumstances such as:

  1. Natural calamities such as flood, cyclone, earthquake;
  2. Riots or civil disturbance;
  3. Fire or explosion;
  4. Action by an enemy.
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Whether conversion of preference shares into ordinary shares is a transfer?

Q: Whether redemption or conversion of preference shares of a company in to ordinary shares shall be taken as transfer?

 

Ans: Yes, any redemption or conversion of preference shares of a company in to ordinary shares shall be treated as transfer. Fair market value of equity shares as on the date of allotment shall be considered as the full sales consideration.

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When a person is liable to pay tax in case of extinguishment of any rights?

Q: When a person is liable to pay tax if there is any transfer by way of extinguishment of any rights in an asset

 

Ans: Profits arising from the receipt of money or assets from the insurance company due to damage or destruction of any capital asset shall be taxable in the year in which such money or asset is received. Fair market value of the asset as on the date of receipt shall be treated as the full value of consideration in lieu of such transfer.

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What is meant by compulsory acquisition?

Compulsory acquisition means that a person to whom the asset belongs is not willing to transfer the asset but his asset is compulsorily acquired under law. E.g. acquisition of immovable properties under the land acquisition Act, acquisition of industrial undertaking under the Industries (Development and regulation Act), Pre emptive purchase of immovable properties by IT department.

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What is the full value of consideration?

Full value of consideration means the whole price without making any deduction from it irrespective of the market value of the asset, adequacy or inadequacy of the price.

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Whether capital gains are taxable on accrual or receipt basis?

You are required to pay tax on capital gain as soon as you acquire right to receive the price in lieu of the asset transferred irrespective of the time of actual receipt.

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What is cost of acquisition?

Cost of acquisition is the price which you have paid or incurred to acquire the asset. This also includes the expenses incurred in completing the title of the asset acquired.

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What is the cost of acquisition, if asset is acquired from a previous owner?

Q: If the asset is acquired from a previous owner, what is the cost of acquisition of the asset for me?

 

Ans: The fair market value of the asset on the date on which the asset became the property of the previous owner shall be treated as your cost of acquisition.

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What shall be the amount of capital gain on the transfer of bonus shares?

The entire sales consideration received on the transfer of bonus shares shall be treated as capital gain.

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Do I need to pay tax on money received on surrender of tenancy rights?

Q: Do I need to pay capital gains tax on money received on surrender of tenancy rights?

 

Ans: Where no cost was incurred for acquiring tenancy rights, the entire consideration received on surrender of tenancy right shall be treated as capital gain. If tenancy was acquired 3 years before its surrender, the gain will be long term capital gain.

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Do I have to pay capital gains tax on insurance claim received?

Q: My machinery was lost in fire for which I was compensated by the insurance company. The insurance claim received is more than the cost of acquisition of the machinery .Do I have any capital gains?

 

Ans: If the insurance claim received is more than the cost of acquisition of the asset, the excess amount received shall be taxable under the head capital gains. This comes within the definition of transfer due to extinguishment of rights as the asset has ceased to exist.

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Whether self occupied residential house shall be eligible for exemption u/s 54?

Q: I have earned a long term capital gain from the transfer of a self occupied residential house, income of which is chargeable under house property. Whether long term capital gain arising from the transfer of such house property would be entitled to exemption under section 54?

 

Ans: Although NIL or negative income of a self occupied house is charged to tax under house property, still any long term capital gain from the transfer of such self occupied residential house property shall be eligible for exemption under section 54.

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Can I claim deduction for property bought in joint name?

Q: For claiming exemption under section 54 I have bought a new residential house property in joint name with my wife but the consideration was paid exclusively by me. Can I claim deduction for the full amount invested?

 

Ans: Even if the house property purchased is in the joint name with your wife, you can claim exemption under section 54 for the amount invested in the new asset as the consideration for the purchase of house property was paid exclusively by you. Exemption under section 54 is independent of the ownership of the new asset purchased.

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What is the minimum holding period for an asset to save tax?

Q: Is there any minimum period for which I should hold the property if I want to save tax on capital gain from the transfer of such property?

 

Ans: If you want to save tax on capital gain from the transfer of a property, you should transfer such property only after 3 years.

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What is the meaning of property for capital gain purpose?

Property means property of any kind including tangible assets and intangible rights. e.g. Land, building, jewellery, shares, tenancy rights, copyrights, leasehold rights, Goodwill, patents and trade marks and others. Property includes not only physical property but also any right, title, or interest in such a property.

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Do I need to pay capital gain tax on encashment of these NSC’s?

Q: Whether National Savings Certificates are capital assets? Do I need to pay capital gain tax on encashment of these NSC’s?

 

Ans: National Savings Certificates are capital assets. Since NSC’s can not be transferred by any mode except through gift, there is no capital gain. Transfer does not include encashment so there is no capital gain even on encashment of NSC.

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Whether precious stones can be treated as capital assets?

Yes, precious stones are treated as capital assets.

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Whether old and unyielding rubber trees can be treated as capital assets?

Q: My father had some old and unyielding rubber trees. Whether these can be treated as capital assets?

 

Ans: Yes, these can be treated as capital assets.

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Which is the year in which capital gains are charged to tax?

Capital gains are charged to tax in the year in which transfer of the asset took place irrespective of the actual receipt of consideration which may be received in a later year. However there are certain exceptions to this:

  1. Conversion of capital asset into stock in trade;
  2. Compulsory acquisition of an asset;
  3. Damage or destruction of any capital asset by fire or other calamities.
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How do I calculate my net consideration price?

To calculate net consideration price:

 

Sales consideration

 

Less: Expenses borne by the assessee

  1. Cost of stamp paper purchased;
  2. Stamp duty and registration fees;
  3. Brokerage and commission paid to agents;
  4. Any legal expenses incurred by the transferor to effect transfer of title.
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How can I calculate my indexed cost of acquisition?

You can calculate indexed cost of acquisition by using :

 

Your actual cost of acquisition * CII of the year in which asset is transferred/CII of the year in which asset is first acquired by you.

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How to calculate indexed cost of acquisition acquired before 1981?

Q: How can I calculate indexed cost of acquisition if the asset is acquired by me from my father before 1981?

 

Ans: Actual cost of the asset to your father or Fair market value as on 1-4-1981 whichever is more * CII of the year in which asset is transferred/CII of 1981-1982

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Whether long term capital gain from the sale of equity shares exempt?

Yes, LTCG from sale of equity shares is fully exempt.

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What shall be cost of improvement?

Any capital expenditure incurred by you or previous owner of the asset for making additions or alteration to such capital asset which enhances the value of the asset or rise it’s price shall be treated as cost of improvement. Any cost of improvement before 1-4-1981 shall be ignored.

 

Some expenses which can not be taken as cost of improvement are:

  1. Property Taxes;
  2. Repairs and maintenance expenses;
  3. Any Estate duty paid in case of inherited property;
  4. Expenditure for improving title to the property;
  5. Expenditure on removing encumbrances(anything that burdens title to the property).
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Whether interest paid shall be treated as cost of acquisition?

Q: Whether interest paid on loan taken for purchasing capital asset shall be treated as cost of acquisition?

 

Ans: Yes, interest paid on loan taken for purchasing capital asset shall be treated as cost of acquisition

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Whether expenses incurred for taking loan shall be taken as cost of acquisition?

No. Expenses made for taking loan shall not be considered as cost of acquisition of an asset.

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Whether expenses incurred to complete the title shall be the cost of acquisition?

Q: I have incurred some legal expenses so that I can get better voting rights in respect of shares of a company held by me. Whether such expenses shall be considered as cost of acquisition?

 

Ans: Yes, expenses incurred in completing the title of the asset shall be taken as cost acquisition.

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In which year should I report my income from dividend?

Dividend is considered to be income of the year in which it is declared.

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Which are the payments that are not treated as dividend?

Any of the following payments shall not be treated as dividend :

  1. Any dividend more than and not set off against loan or advance
  2. Any payment by company on purchase of its own shares
  3. Any distribution of shares made to the shareholders of de-merged company even if capital of such company has reduced.
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What is the tax treatment of dividend distributed by Domestic Company?

Any amount declared, distributed or paid by a domestic company by way of any dividend out of current or accumulated profits except deemed dividend is not taxable in the hands of the shareholder.

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What is the tax treatment of deemed dividend?

Deemed dividend from a domestic company i.e. a payment in the form of loan or advance to a specified shareholder or a specified concern, is taxable in the hands of the recipient under Income from other sources.

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Which dividends are taxable in the hands of a shareholder?

Following dividends are taxable in the hands of a shareholder under Income from other sources:

  1. All Dividends from a foreign company.
  2. Deemed dividend from a domestic company.
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What is the taxability of dividend or any other income distributed by UTI?

Any income distributed by UTI in respect of following is not taxable:

  1. Mutual funds under section 10(23D);
  2. The specified company;
  3. Units from the administrator of the specified undertaking.
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Can I claim deductions from an exempt dividend income?

No, you cannot claim deduction from an exempt dividend income because if any income is exempt from tax then no deductions can be claimed from such exempt income.

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Can I claim deduction for interest paid on amount borrowed for investment?

Q: Can I claim deduction for interest paid on amount borrowed for investing in shares?

 

Ans: If any interest is paid on loan taken for investment in shares and such shares are held as investment, interest is not allowed as a deduction. But when these shares are kept as stock in trade then interest on capital borrowed is allowed as a deduction. However, any interest on overdue interest due to non payment is not allowed as a deduction.

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Can I claim deductions from winnings from lotteries, card games, horse races,etc?

Q: Can I claim deductions under section 80C to 80U from winnings from lotteries, crossword, puzzles, card games, horse races, etc.?

 

Ans: No. Although income by way of winnings from lotteries, crossword puzzles, horse races, card games form part of Gross Total Income but deductions under sections 80C to 80U are not allowed on this part of Gross Total Income. These incomes are charged to tax at a special rate of 30%.

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What is the tax rate on winnings from lotteries, card games, horse races, etc?

Q: What is the rate of tax that I need to pay on winnings from lotteries, puzzles, card games, horse races, etc?

 

Ans: Although income by way of winnings from lotteries, crossword puzzles, horse races, card games form part of Gross Total Income but these are taxed at a special rate of 30%.

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What is the tax rate on income from owning and maintaining race horses?

Q: What is the rate of tax that I need to pay on income from owning and maintaining race horses?

 

Ans: Income from owning and maintaining race horses are taxed at normal rates after being included in Gross Total Income.

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Can I claim deductions from income from owning race horses?

Yes, you can claim expenses incurred on owning and maintaining race horses as a deduction from income earned.

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Can I carry forward loss from owning and maintaining race horses?

Yes, loss from owning and maintaining race horses can be carried forward for four assessment years.

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Can I carry forward any loss under income from other sources?

Q: Can I carry forward any loss under income from other sources other than loss from owning and maintaining race horses?

 

Ans: No, any loss under Income from other sources other than loss from owning and maintaining race horses can not be carried forward to next years.

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What is the basis of chargeability of tax on interest on securities?

Interest on securities is chargeable to tax either on cash basis or due basis depending upon the system of accounting followed. Where no system of accounting is followed interest is taxed on due basis.

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Which interest incomes are exempt from tax?

Interest on certain Securities, Bonds, Savings certificates and other certificates issued by the Government are exempt. e.g. Interest on Post office savings bank account, Interest on Post office Cumulative Time deposits(CTD), Interest from PPF account, Interest on Post office fixed deposit and others.

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Can the burden of interest on income be shifted to another person?

No. If any interest on securities becomes due and the securities are transferred to some other person just before the due date of interest, this shall be considered as shifting of burden of income which is not allowed.

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Which transactions are not allowed in relation to securities?

The following transactions are not allowed:

  1. Shifting of interest income e.g. (a) sale and buyback of similar securities (b) transaction relating to securities resulting in lossor no income;
  2. Loss arising from purchase and sale of securities;
  3. Bonus stripping in case of units.
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Which deductions can I claim against my dividend income?

Following deductions are allowed from your taxable dividend income:

  1. Amount spent for realization of dividend such as commission;
  2. Interest on money borrowed for purchasing shares irrespective of any income from such shares;
  3. Any expenditure other than capital expenditure which is incurred for the purpose of earning such income.
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Whether TDS is deducted on Government securities?

No, TDS is not deducted on government securities.

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What kind of securities need to be grossed up?

Grossing up of the following securities are required :

  1. Tax free non government securities;
  2. less tax non government securities.
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How can I gross up my interest on securities?

Grossing up of interest on securities can be made by using the below formula:

 

(Net amount *100)/(100-rate of TDS)

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Which deductions are allowed from interest on securities?

Following amounts are allowed as deductions from interest on securities:

  1. Expenses incurred for collection of interest;
  2. Interest on loan taken for investment in securities;
  3. Any expenditure other than capital expenditure made exclusively for the purpose of earning such income.
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When income from letting of machinery, plant or furniture is chargeable?

Q: When income from letting of machinery, plant or furniture is chargeable under Income From Other Sources?

 

Ans: Income from letting of machinery, furniture on hire shall be taxed under Income from other sources if such income is not chargeable under business and profession.

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How is composite rent charged to tax?

If the rent for the property includes payment for usage of assets or for providing additional services, and the person will not accept the letting of one without others, such income is taxable under Income From Other Sources if such income is not taxed under income from business e.g. Furnished Accommodation, Paying guest accommodation, etc.

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Which deductions are allowed while computing income from letting of machinery?

Q: Which deductions are allowed while computing income from letting of machinery, plant, furniture, etc?

 

Ans: Following deductions are allowed from “income from letting of machinery, furniture”:

  1. Current repairs of premises;
  2. Insurance premium against risk of damage or destruction of premises;
  3. Repairs and insurance of machinery;
  4. Depreciation;
  5. Any expenditure other than capital Expenditure incurred for earning such income.
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Whether a gift received from a relative is taxable?

No, Gift from a relative is not taxable. A relative can make a gift of any amount without any limit.

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A non-relative can gift any amount but if aggregate amount of gifts made by a non related person is equal to or less than Rs 50000, such amount is exempt from tax. Otherwise the whole amount of money received as gift is taxable under Income From Other Sources.

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What amount of gift received from non relative is chargeable to tax?

Q: I have received a gift of Rs 1,00,000 from my friend. What is the amount on which I need to pay tax?

 

Ans: If you have received a gift of Rs 1,00,000 from a non related person, the whole amount is charged to tax under income from other sources. If the aggregate amount of money received as gift during the year exceeds Rs. 50,000,the whole amount received as gift is taxable and not just the amount exceeding Rs 50,000.

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Under what circumstances a gift is not taxable?

Where any money or property is received under following circumstances then gifts are not taxable:

  1. On the occasion of marriage of an individual;
  2. Under a will or by way of inheritance;
  3. From a relative;
  4. In contemplation of death of the payer;
  5. From any local authority;
  6. From any charitable institute registered under sec12AA;
  7. From any educational institute, hospital, any fund, foundation, university, trust under sec 10(23c);
  8. Any article or thing received as gift except immovable property (without consideration), shares and securities, Jewellery, archaeological collection, drawings, paintings, sculptures, any work of art and bullion as these items are taxable in the hands of receiver.
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I have received a gift from my fiancée. Is it taxable?

Yes, Gifts received from a fiancée shall be taxable. It shall be treated as gift received from an unrelated person .A fiancée cannot be treated as a spouse of the person since there are chances that the marriage may not materialize.

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Is family pension received is taxable?

Q: Whether family pension received by the legal heirs of a deceased employee can be charged to tax under Income From Other Sources?

 

Ans: Yes, family pension received by the legal heirs of a deceased employee from his employer shall be treated as income chargeable under Income From Other Sources.Although an amount of Rs 15000 or 33 1/3 % of pension received whichever is lower is allowed as deduction.

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Whether amount received in lump sum can be treated as a family pension?

Q: Whether a lump sum payment made by an employer can be treated as a family pension?

 

Ans: Family pension means a fixed monthly amount received from an employer in the case of employee’s death. So lump sum money received from employer on the death of an employee cannot be treated as a family pension.

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What amount of family pension is taxable under Income from other sources?

Family pension is taxable after allowing a deduction of 33.33% or Rs 15,000, whichever is lower.

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Whether ex gratia payment received on the death is taxable?

Q: Whether ex gratia payment received on the death of a person who died in service is chargeable to tax?

 

Ans: No, Ex gratia payment received on the death of a person who died in service is not taxable if it is received from the central Government, the State Government, local authority or public sector undertaking.

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Whether any amount deducted or received by the employer is taxable?

Q: Whether any amount deducted or received by the employer can be taxed under Income From Other Sources?

 

Ans: Where any employee's contribution which has either been deducted from his salary or paid by him to the employer for depositing under welfare scheme of an employee has not been deposited or has been deposited after the due date by the employer, such amount shall be taxable under Income From Other Sources.

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Can a capital expenditure incurred to earn income be allowed as deduction?

Q: Can a capital expenditure incurred for the purpose of earning any income under Income From Other Sources be allowed as deduction?

 

Ans: Capital expenditure shall not be allowed as deduction for computing income chargeable under Income From Other Sources.

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What amounts are not allowed as deduction in Income From Other Sources?

Q: What are the amounts that are not allowed as deductions in computing Income From Other Sources?

 

Ans: Following are the amounts that are not allowed as deduction:

  1. Personal expenses of the assessee;
  2. Interest or salary paid outside India on which tax has not been deducted;
  3. Cash payments which exceeds Rs 20,000;
  4. Wealth tax paid;
  5. Any expenditure in connection with winning from lotteries, crossword puzzles, races including horse races.
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Can I claim deduction of interest paid on amount borrowed for payment of tax?

Q: I have paid interest on amount borrowed for payment of tax liabilities. Can I claim the amount paid as deduction from income computed under income from other sources?

 

Ans: Since payment of taxes is a personal expense, interest on sums borrowed for meeting personal liabilities is not allowed as a deduction for computing income chargeable under income from other sources.

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What is deemed income under Income From Other Sources?

Any amount received due to waiver of liability or otherwise or some benefit has been derived which was earlier allowed as a deduction shall be treated as deemed income of the year in which such amount is received or benefit has been derived.

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If winnings for lottery arise or accrue outside India, taxable in India?

Q: If winnings for lottery arise or accrue outside India, whether these will be taxed in India or outside India?

 

Ans: Taxability of any income in India depends on the residential status of the person. If a person is a resident of India, his entire income will be taxed in India. So if a person is a resident of India, amount of lottery, winnings shall be taxed under Income From Other Sources in India even if it accrue or arise outside India.

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Is it necessary to prove the relation with donor to claim benefit of gift?

Q: Whether one can claim the benefit of gift without proving it to be either received from a relative or on any occasion specifically mentioned?

 

Ans: No, a person can claim tax benefit in respect of gifts only if he proves the identity, creditworthiness and financial capacity of the donor. Otherwise the whole amount shall be taken as his taxable income.

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Whether gift received on marriage have any limits?

No, any amount received by a person on the occasion of his marriage from some other person is not taxable whether or not such person is related.

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No, gifts received on all marriage related functions are not exempt, i.e. gifts received on engagement are not exempt but gifts received on reception are exempt because reception is subsequent to marriage provided gift are given by relatives only.

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Whether gifts received at the time of second marriage are exempt?

Q: I have received some gifts at the time of my second marriage. Whether these gifts are taxable or exempt?

 

Ans: Gifts received even at the time of second marriage are exempt.

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If I receive Rs 25,000 each from 5 persons, what would be taxability?

Since the aggregate amount of money received during the year is more than Rs50,000, entire Rs125000 is taxable. The taxability of any gift does not depend on receipt per person but it is the aggregate amount received during the year which is taxable or exempt.

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Whether interest free loan from a friend can be treated as a gift?

Loan is subject to repayment and can not be taken as received without consideration, so interest free loan is not considered as a gift.

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Whether car received as a gift is taxable?

Q: I have received car as a gift. Is it taxable under income from other sources? Explain meaning of property.

 

Ans: Property means:

  1. Immovable property being land and building;
  2. Shares and securities;
  3. Jewellery;
  4. Drawings and paintings;
  5. Sculptures and other work of art;
  6. Bullion;
  7. Archaeological collections

So if you receive car as a gift, nothing is taxable under income from other sources as car is not included in the meaning of property for the purpose of taxability of gift under income from other sources.

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Is rural agricultural land received as gift, taxable?

Q: I have received a plot of agricultural land situated in a rural area in India. Is it taxable under income from other sources?

 

Ans: A plot of agricultural land situated in a rural area is not a capital asset. So nothing is taxable under income from other sources. If the gift of the property is a capital asset, it is taxable under income from other sources.

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What are the basic requirements to treat a particular receipt as a gift?

Relationship and occasion are the basic requirements to treat a particular receipt as gift.

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What is the tax treatment of gift received from relative?

Any sum of money or property received during the previous year without consideration from a relative or on any specific occasion by an individual or HUF, is exempt from tax.

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What is the tax treatment of gifts received from non-relatives?

A non-relative can gift any amount but if aggregate amount of gifts made by non related person is equal to or less than Rs 50,000, such amount is exempt from tax. Otherwise the whole amount is taxable.

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Whether indirect expenses incurred for running business allowed as deduction?

All expenses necessary to meet the statutory obligations to maintain the status of company till the time it is either dissolved or it's name is struck off from the register of registrar of companies shall be allowed as deductions, although not directly related to earning any income e.g. if a Company's only income is interest from investments, it can still claim deductions on account of rent, salary, filing fees, etc. to maintain it's establishment.

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Is interest on delayed payment of compensation, a revenue receipt?

Q: Whether interest received on delayed payment of compensation on compulsory acquisition of land is treated as a revenue receipt or a capital receipt?

 

Ans: This is a revenue receipt which is liable to tax after a deduction of 50%.

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Whether interest on short term deposits for preproduction period taxable?

Q: Whether interest on short term deposits for preproduction period taxable under Income From Other Sources?

 

Ans: Interest on short term deposits during preproduction period is taxable under Income From Other Sources.

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Whether a sum received by a widow of an employee under KIP taxable?

Q: Whether a sum received by a widow of an employee under keyman insurance policy taxable?

 

Ans: Any sum received by a widow under Keyman insurance policy is taxable under Income From Other Sources.

 

If it is received by the company, it is taxable under Business or profession.

 

If it is received by the employee himself, it is taxable as profits in lieu of salary.

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Can a dealer in shares adjust the loss against dividend income?

Q: I am a dealer in shares and have received dividend .Can I adjust the loss arising from dealing in shares against dividend income?

 

Ans: If you have received any dividend income which is taxable under Income From Other Sources, loss arising from dealing in shares can be adjusted against that dividend income provided shares are held as stock in trade.

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Is interest on cumulative deposit scheme taxable on accrual basis?

Q: Whether interest on cumulative deposit scheme is taxable on accrual basis or receipt basis?

 

Ans: Interest on cumulative deposit scheme is taxable on accrual basis annually on the basis of intimation received about interest accrued by individual depositors.

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How is income from betting different from stake money?

Stake money is the prize money won by the owner of horses carrying on the business of owning and maintaining horses. This is charged to tax under income from Business or profession. Income from betting is chargeable under Income From Other Sources.

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Whether a person can claim deduction of expenses only if he earns income?

No, income is not a prerequisite for claiming deduction of an expense. Example: if money is borrowed for investment in shares, interest on capital borrowed is to be allowed as a deduction irrespective of dividend being received.

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Is interest paid on delayed payment of call money allowed as deduction?

Q: Whether interest paid on delayed payment of call money for allotment of shares allowed as deduction?

 

Ans: Any interest paid on delayed payment of call money for allotment of shares shall be allowed as a deduction only if the money is borrowed for the purpose of business.

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Is interest earned on pledged term deposits chargeable to tax?

Q: I have taken a loan from bank on security of some term deposits. Whether interest received by me on these deposits be chargeable to tax?

 

Ans: Tax shall be charged only on the net amount of interest received on term deposits after deducting interest paid on loan taken from bank against the security of such term deposits.

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Is rent from vacant land chargeable under income from house property?

Q: I have received rent from a vacant land. Whether such income will be taxed under income from house property?

 

Ans: No. Rent from a vacant land is taxed under Income From Other Sources as vacant land does not form part of the house property.

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Is Annuity payable by employer chargeable under salaries or Other Sources?

Q: Is Annuity payable by employer chargeable under salaries or under Income From Other Sources?

 

Ans: Annuity payable by employer is chargeable under salaries but annuity payable under a will, contract or trust deed is taxable under Income From Other Sources.

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Whether payment made by a company on purchase of its own shares is dividend?

No, dividend does not include any payment made by a company on purchase of its own shares.

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Whether shares distributed under scheme of de-merger are included in Dividend?

Q: Whether shares distributed by a resulting company under scheme of demerger to the shareholders of the demerged company irrespective of reduction in capital of the demerged company are included in Dividend?

 

Ans: Dividend does not include distribution of shares made under scheme of demerger.

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Whether dividend declared out of exempt income chargeable to tax?

Even if dividend is declared out of exempt income, entire dividend income is chargeable to tax. Example: if a foreign company declares dividend out of agricultural income in India, such dividend is chargeable to tax in the hands of the shareholders.

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Whether period of holding of shares make any difference to tax liability?

Q: Whether period of holding of shares make any difference to the liability of the shareholder while paying tax on dividend income?

 

Ans: A shareholder is required to pay tax on entire dividend income if his name appears in the register of members even though he was not the shareholder for the entire period.

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What is the due date of interest on securities?

Interest on securities does not accrue on daily basis or period of holding but it accrues according to specified dates mentioned on securities. Example: If one buys some security on 25-2-07 and due dates for interest are march and sep, he becomes entitled to interest for 6 months although his period of holding is just 1 month and few days.

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Whether tax is deducted on winnings from horse races, gambling, betting?

Yes, tax is deducted on winnings from gambling, betting, races @ 30%.

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Is consolation prize taxable under Income from other sources?

Q: I have received a consolation prize in a quiz contest. Whether this receipt is taxable under Income from other sources?

 

Ans: If any receipt is not by way of winnings then such receipt is not taxed under Income From Other Sources. So if you have received a consolation prize in a quiz contest or a memo has been received for participation in some programme, such receipt is not taxable as income from other sources.

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Under which head composite rent is taxable?

Q: Whether composite rent received is taxable under income from other sources if letting of building is possible without letting other facilities?

 

Ans: Yes, composite rent received will be apportioned and taxed under different heads where the rent is received jointly for building and additional facilities and letting of building is possible without the facilities. Rent of additional facilities shall be taxed under income from other sources if not taxed under income from business or profession.

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What deductions are available to insurance agents?

If an agent does not maintain any books of accounts and his total commissions are less than Rs 60,000 during the year, the insurance agent can take the benefit of Ad Hoc deduction. Total Commission is the sum of 1st year commission, renewal commission and bonus commission. Amount of Ad Hoc deduction shall be EITHER

  1. 50% of 1st year commission and 15% of renewal commission subject to max of Rs 20,000 if separate figures for 1st year commission and renewal commission are available OR
  2. 33.33% of gross commission subject to max of 20000,if separate figures are not available. Gross commission shall not include bonus commission
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What deductions are available to agents other than insurance agents?

An ad hoc deduction of 50% of the gross receipts should be given to the authorized agents of UTI or the securities of central government such as NSC, post office time deposits, post office recurring deposits. Such benefit of ad hoc deduction is available only if detailed accounts of expenses incurred has not been maintained and gross receipts from all the sources together is less than Rs60,000.

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Can business income be treated as other income after discontinuance of business?

Q: If an income from a Business is received after it’s discontinuance, Whether such receipts shall be taxable under Business or Income From Other Sources?

 

Ans: Any receipt relating to business which is received after it’s discontinuance is taxable under Income From Other Sources.

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Whether rent received from subtenant will be considered as house income?

Q: I receive income from letting of godown to my subsidiary company. My subsidiary company has further let out the godown for a higher rent than the rent paid to me. Whether assessee company has to pay tax on the additional rent received by the subsidiary company?

 

Ans: Difference in income received by a subsidiary company shall be treated as Income From Other Sources of the assessee company. This is known as subletting.

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Whether interest earned before commencement of business is business income?

Q: Whether any interest earned on short term investment of funds borrowed for setting up a factory during construction of factory before commencement of business is considered as Income From Other Sources?

 

Ans: Interest earned on short term investments made before the commencement of business shall be treated as Income From Other Sources. The liability of treating such interest as income can not be avoided since capitalisable interest on capital borrowed during preproduction period will be reduced to the extent of interest earned on such short term investments.

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Whether bonus shares issued by a company are treated as dividend?

Q: Whether bonus shares issued by a company after capitalizing it's profits be treated as dividend?

 

Ans: Bonus shares issued by a company after capitalizing it's profits shall not be treated as dividend as there is no release of assets by the company but bonus shares issued by a company to preference shareholders shall be treated as dividend.

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Whether distribution in kind can be treated as dividend?

Any distribution whether in cash or in kind entailing the release of assets shall be treated as dividend.

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Does re organization of capital amounts to deemed dividend?

If re organization of capital does not result in reduction of capital, deemed dividend will not apply.

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Whether loan made to shareholder in money lending business is dividend?

Q: Whether any advance or loan made to a shareholder or to a concern by a company in the money lending business can be treated as dividend?

 

Ans: No, if any loan or advance has been given in the ordinary course of business and money lending is the business of the Company, such loan or advance shall not be treated as deemed dividend.

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What is the taxability of gifts received for business purpose?

Q: I am a dealer in properties. I receive a gift of a property for my business purpose. What is the taxability of such gift?

 

Ans: Only gift by way of property received as a capital asset is taxable under income from other sources. So if you receive any property as stock in trade, nothing will be taxable. In addition any property by way of gift as raw material, consumable stores is also not taxable under income from other sources.

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Whether FDR, watches, motor vehicles are taxable gifts?

Q: Whether any gift received in the form of FDR,watches,motor vehicles is treated as gifts for the purpose of income from other sources?

 

Ans: Gift in the form of FDR, watches, motor vehicles etc can not be treated as taxable gift. For the purpose of income from other sources Gift means any "sum of money" or property received without or inadequate consideration. FDR,watches, motor vehicles etc. are gifts in kind which are exempt from tax.

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Who all are the persons from whom my wife can receive tax free gifts?

If your wife receives gift from :

 

You, Your brother or sister or their spouse, Her brother or sister or their spouse, Brother or sister of either of your parents or their spouse, Her lineal ascendant or their spouse, Your lineal ascendant or their spouse.

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My father-in-law has gifted me Rs 251000.He is an NRI. Is this amount taxable?

No, the amount is not taxable as it is received from your father in law who comes within the definition of a relative. His NRI status shall not make any difference.

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Is higher education deduction allowed for overseas studies?

For purpose of claiming education loan interest deduction under section 80E, 'higher education' means education whether in India or outside India.

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Within what time limit money should be brought in India to claim 80RRB deduction?

Where royalty on patents is earned from a source outside India, then the amount should be brought to India in convertible foreign exchange within 6 months from the end of the year in which income is earned.

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Can husband and wife both claim tuition fee deduction?

If husband and wife are filing separate income tax returns, can each of them claim deduction for 2 children if they have more than two children. The deduction is available to an individual for any 2 children. So, if the couple have more than 2 children and husband and wife are filing separate returns, then wife can also claim deduction for the remaining children upto maximum of 2 children.

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Can 80DDB deduction be claimed for the spouse who file their own tax return?

Deduction under section 80DDB can only be claimed either for individual himself or for his dependents. ‘Dependent’ includes spouse, children, brother, sister, parents. So any amount spent for medical treatment of a specified disease of a spouse can be claimed only when spouse is dependent on the individual. Filing individual return does not make the spouse status as independent.

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What is the benefit of deductions?

Deductions reduce your Gross TaxabIe Income by the amount of deductions that are claimed and allowed. It is then that the taxable income is arrived at.

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Can “provident fund” substitute "recognized and statutory provident fund"?

No, “provident fund” can not substitute “recognized and statutory provident fund”, as it includes unrecognized provident funds as well. You can not claim deduction for contributions made to unrecognized provident funds.

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What are the benefits of opening a PPF account?

The benefits of opening a PPF account include:

  1. The interest earned by you on your PPF account is totally exempt from tax.
  2. Any amount deposited by you in your PPF account during the year can be claimed as deduction under 80C.
  3. You can even apply for loan against your PPF account.
  4. Your PPF account is protected from attachment (forfeiture/confiscation) under any order of court, with respect to your liability or debt.
  5. In case you are going to shift, your PPF account can also be shifted to a place of your convenience.
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What are the disadvantages of a PPF account?

The disadvantages of of a PPF account are:

  1. You cannot withdraw from your PPF account before the completion of 6 years.
  2. A Hindu Undivided Family (HUF) and a trust cannot open a PPF account.
  3. You cannot open a joint PPF account.
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I paid the LIC premium for my mother. Can I claim that as a deduction?

No, you can claim deduction for the payments of LIC premium only for yourself, your child and your spouse.

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Can I claim deduction for LIC premium paid for my wife, who pays her own income tax?

Yes. Deduction for LIC is available on payment basis. So, if you have paid the LIC premium for your spouse, you can claim deduction.

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Can I claim deduction for premium paid for a joint LIC policy?

Yes, you can claim deduction for premium paid for a joint LIC policy, irrespective of the beneficiary. The person who makes the payment can claim a deduction up to 20% of the sum assured.

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Can I claim deduction for contribution to Mutual Funds of private companies?

Yes, you can claim the contributions to Mutual funds of private companies as deductions

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Can I claim deduction for the amount deposited in a Fixed Deposit for 3 years?

No. For you to be able to claim an amount deposited in any Fixed Deposit, it needs to be with a scheduled bank for at least 5 years.

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What is the tax liability of interest accrued on NSC?

Under 80 C, you can claim deduction not only for the amount invested, but also for the amount of interest accrued for that year, which is assumed to have been reinvested. However, interest accrued on NSC is taxable under income from other sources.

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Can I claim deduction for more than one house property?

If you have spent an amount on the purchase or construction of more than one house property, you can claim deduction for only one of them.

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What is the maximum deduction which I can claim under 80CCC?

The maximum amount of deduction you can claim under 80CCC is Rs. 1,00,000.

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Can I claim deduction for the kids with higher tuition fees?

Q: I have more than 2 children. Can I claim deduction for the kids with higher tuition fees?

 

Ans: Even if you have more than two children, you can claim the benefit for any two children only. However, there is no limit on the amount of tuition fees spent per child. So, opt for those children whose tuition fee is higher.

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How do I determine which companies are engaged in infrastructure?

Certain conditions need to be satisfied for a company to be engaged in infrastructural development. These are:

  1. The company should be registered in India.
  2. It should be approved by the Central Government or State Government or a local Authority or statutory body.

The application form for the subscription to its shares and debentures specifies that the company is engaged in infrastructure and will qualify for deduction under 80C.

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Which investments qualify under infrastructural development?

Q: Does investment in shares/debentures of all the companies engaged in infrastructural development (foreign, listed, private, etc.) qualify for deduction?

 

Ans: You can claim deduction under section 80C for subscription to shares and debentures of eligible issue of capital made by a public company or public financial institution whose proceeds are utilized for infrastructure company. It has to be formed and registered in India and approved by the Government of India. It cannot be a foreign company. It may be listed.

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Does the exchange of shares and debentures qualify as deduction?

Q: Does the exchange of shares and debentures of a company engaged in infrastructural development qualify as deduction?

 

Ans: Under section 80C, the subscription to shares and debentures which are a part of eligible issue of capital approved by Board can be claimed as deduction. Only those shares and debentures which are purchased (and not bought back/ exchanged/repurchased) out of the issue brought by the company can qualify for deduction under 80C.

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What is the maximum deduction I can claim for insurance premium paid?

Q: Can I get the deduction for an amount of insurance premium paid exceeding 20% of sum assured?

 

Ans: No, the maximum amount of premium paid on insurance policy that can be claimed by you as deduction can not exceed 20% of the sum insured.

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If I take a single premium policy, what is the minimum holding period?

The minimum holding period for a single premium policy is 2 years. If such a policy is terminated within 2 years after the date of commencement, the premium paid shall be treated as income of the year in which the policy is terminated.

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What is minimum holding period for shares qualifying for deduction under 80C?

Q: Is there any minimum holding period for equity shares or debentures which qualify for deduction under 80C?

 

Ans: Yes, there is a minimum holding period for equity shares or debentures which qualify for deduction under section 80C. It is three years. If any equity shares or debentures are transferred within 3 years of the date of their acquisition, the aggregate amount of deductions claimed in earlier years shall be taken as the income of the year in which the sale or transfer takes place.

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Who can claim deduction under 80CCC?

Only an individual, resident or non resident, can claim deduction under 80CCC.

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What are the kinds of payments for which I can claim deduction under 80CCC?

If you pay or deposit any amount in the annuity plan of LIC or any other insurer during the previous year for receiving pension from the fund, you are allowed to claim deduction under 80CCC. This amount should be paid out of your taxable income.

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Does interest accrued or bonus qualify for deduction under 80CCC?

Q: Does the amount paid or deposited by me in annuity plan of LIC qualify for deduction under 80CCC, including any interest accrued or bonus thereon?

 

Ans: Only the amount deposited to continue the plan or to bring it in effect can qualify for deduction under 80CCC. However, this does not include any accrued interest or bonus.

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What happens if the annuity plan on which deduction has been claimed, is surrendered?

Q: What should I do if I have claimed the deductions on account of amount paid to the annuity plan and now the plan is surrendered?

 

Ans: In case an amount standing to the credit of fund along with interest and bonus has been received due to surrender of the annuity plan, the deduction for which has already been claimed, the whole of amount received by you shall be taxable in the year of receipt.

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What is the treatment of the pension received from the fund by me or my nominee?

The amount that is received as pension from the fund shall be taxable in the year of receipt, either in your hands or in the hands of the nominee

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Does the amount received on surrender of the annuity plan include interest and bonus?

Yes, the amount received on surrender of the annuity plan is inclusive of interest accrued and bonus (if any). Therefore, the whole of the amount shall be treated as Income.

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Is there any sectoral limit within Section 80C?

It is irrelevant from the deduction point of view whether the assessee has invested the whole of amount permissible, in LIC or partly in LIC and partly in housing loan scheme or for children education. The maximum amount (aggregate) that can be claimed as deduction under Section 80C is Rs. 1 lakh.

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Can I claim deduction under 80CCD if I am not a Government employee?

Yes. Deduction under section 80CCD is available to an individual who is employed by Central Government or any other employer. This deduction is also allowed to an individual who is self employed.

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What is the maximum amount which I can claim under section 80CCD?

To claim payments towards the pension scheme of Central Government/any other employer during the year as deductions under section 80CCD, the following limits apply:

  1. Any amount paid by employee subject to a maximum of 10% of his salary of the previous year.
  2. Any amount contributed by employer subject to a maximum of 10% of the employee’s salary.
  3. Amount contributed by a self employed individual subject to a maximum of 10% of his Gross total income in the previous year.

Note: Salary means the sum of Basic salary and Dearness allowance.

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Can the employer's contribution to the pension scheme be claimed as deduction?

Q: Can the employer's contribution to the pension scheme of Central government/any other employer be claimed as deduction?

 

Ans: Yes, the employer's contribution to the pension scheme of Central Government can be claimed as deduction up to 10% of the employee’s salary.

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What is the treatment of any amount received on the closure of a pension scheme?

Q: What is the treatment of any amount that is received on the closure of a pension scheme of central Government/any other employer?

 

Ans: If any amount is received from a pension account, either on the closure or opting out of the scheme, the whole of the amount received together with the interest shall be treated as income of the year in which such amount is received.

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What is the minimum holding period for shares of a infrastructure company?

Q: What is the minimum period for which I have to hold shares and debentures of a company involved in infrastructural development?

 

Ans: The minimum period for which you have to hold shares and debentures of a company engaged in infrastructural development is 3 years. If the cost of any share or debenture which has been allowed as deduction is sold by you within 3 years from the date of its acquisition, the amount of deductions allowed earlier shall be deemed to be your income for the year in which you sold such shares or debentures.

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What is considered as the date of acquisition of shares or debentures?

The date of acquisition of shares and debentures is the date on which the name of the holder is entered in the register of members or debenture holders of the public company.

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Can I claim deduction for amount paid to annuity plan both under 80CCC and 80C?

No, you can claim deduction for the amount paid to annuity plan only under one of the sections, i.e. either 80CCC or 80C.

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What is the treatment of the amount received as pension?

Q: What is the treatment of the amount received as pension from the money deposited in pension scheme account of Central Government/any other employer?

 

Ans: The amount received as pension from the money deposited in the pension scheme of the Central Government or other employer, either by the individual or by nominee, shall be treated as income of the year in which such money is received.

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Can deductions for money paid to pension scheme be claimed under 80C and 80CCD?

Q: Can deductions for money paid to the pension scheme of Central government/any other employer be claimed together under Sections 80C and 80CCD?

 

Ans: No, only one of the deductions, i.e. either under section 80C or 80CCD, will be allowed.

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What is included in “salary” for the purpose of section 80CCD?

Salary, for the purpose of section 80CCD, includes basic salary and dearness allowance, if the terms of employment provide the latter. It does not include any other allowances or perquisites.

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Can I claim deduction under 80 CCD if I was employed before 01-01-2004?

Q: Can I claim the deduction under section 80CCD if I am a person employed by the Central Government before 1-1-2004?

 

Ans: No, the deduction under 80CCD can be claimed by an employee of the Central Government employed on or after 1-1-2004 only.

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What is aggregate amount of deduction which I can claim under 80C, 80CCC and 80CCD?

The maximum aggregate amount of deduction under sections 80C, 80CCC and 80CCD is Rs.1, 00, 000.

 

From AY 2012-2013, contributions made by the central government or any other employer to a pension scheme shall not be included in the limit of Rs 1,00,000.

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If I have subscribed to long term infrastructure bonds, can I claim any deduction?

Yes, you can claim deduction up to an amount of Rs 20,000 under section 80CCF if you have subscribed to the long term infrastructure bonds as notified by the Government during the previous year.

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What kind of payments can I claim for deduction under 80D?

The following payments can be claimed as deduction under section 80D:

  1. Any sum paid to the General Insurance Corporation or any other insurer towards medical insurance premium on your health or the health of your spouse, dependent children and parents.
  2. Any contribution made to the Central Government Health Scheme out of your taxable income.
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Who can claim deduction under Section 80D?

Only individuals (residents and non residents) and HUF can claim deduction under section 80D.

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Can I claim deduction under 80D for premium paid for children not dependent on me?

No, you can not claim deduction for the medical insurance premium paid for your children who are not dependent on you.

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Can I make payment of medical insurance premium in cash to claim deduction under 80D?

No, medical insurance premium paid in cash are not allowed as deduction under section 80D. Deduction under section 80D can be claimed only if the payment is made by any mode other than cash i.e. by Cheque (Bearer, Crossed, Account payee) or by drafts (Crossed or account payee) or by credit card.

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Can I pay medical insurance premium for my independent parents and get deduction?

Yes, you can get deduction under section 80D if you pay medical insurance premium on the health of your parents irrespective of whether they are dependent on you or not.

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Can I claim deduction for insurance premium paid for any member if I am an HUF?

Yes, insurance premium paid on the health of any member of the family by HUF can be claimed as deduction under section 80D.

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What is the amount for which I can claim deduction under 80D?

The amount of deduction which you can claim under section 80D is:

  1. Medical insurance premium paid on your health and on the health of your family, subject to a maximum of Rs. 15,000.
  2. Medical insurance premium paid for your parents, subject to a maximum of Rs 15,000.

However, if the premium is paid for a senior citizen, the maximum amount of deduction can be Rs 20,000 in each category.

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What is the minimum period for which I have to hold a mutual fund?

The minimum period for which you need to hold a mutual fund is 3 years.

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What is the amount of deduction under 80D if I pay premium for senior citizen?

If you pay premium for yourself, your spouse, your children dependent on you, parents, or any member of family of an HUF and such a person is a senior citizen, the amount of deduction under section 80D will be the actual premium paid or Rs. 20,000 whichever is less.

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Who is a senior citizen?

Senior citizen is a person who is a resident of India and is of 65 years or more of age. (60 years or more of age from AY 2012-2013 onwards)

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Who can claim deduction under section 80DD?

Deduction under section 80DD can be claimed only if you are a resident individual or HUF.

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When can I claim deduction under section 80DD?

You can claim deduction under 80DD if:

  1. you have incurred any expenditure for the medical treatment of a dependent, who is a person with disability.
  2. you have deposited any amount either by way of annuity or by way of lump sum money in a scheme framed by LIC/ other insurer/UTI approved by CBDT for the benefit of the dependent, who is a person with disability after his death or death of the member of HUF taking the scheme. You can nominate dependent or any other person of the trust to receive money for his benefit. You can claim this deduction only if you furnish a certificate in a prescribed form issued by a medical authority along with the return of income for the year for which deduction is claimed.
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What is meant by medical treatment with respect to section 80DD?

Medical treatment with respect to section 80DD includes nursing, training and rehabilitation of a handicapped dependent.

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Who are the dependents for whom I can claim deduction under 80DD?

You can claim deduction under section 80DD if you have incurred expenditure on the medical treatment of any of the following dependents: spouse, parents, children, brother or sister. If you are an HUF, dependent means any member of the family. Deduction can be claimed if such a person is dependent on you for his maintenance or support. Also, the dependent must not have claimed deduction under section 80 U for his disability.

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Is nomination necessary under section 80DD?

Yes, nomination is necessary in the sense that either a lump sum amount or annuity is provided from the scheme to the dependent person with disability in case of the death of an individual or member of HUF who had taken the scheme. Such nomination is made so that the amount can be received on his behalf for the benefit of the dependent handicapped.

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Can I claim deduction under 80DD after the expiry of certificate of disability?

Q: Can I claim the deduction under section 80DD after the expiry of the certificate of disability issued by a medical authority?

 

Ans: You can not claim deduction under section 80DD after the expiry of the period after which the certificate issued required reassessment on the extent of disability. You can only claim such deduction if you have obtained a fresh certificate of disability and attached it with the income tax return for the year for which deduction is claimed.

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What is the amount of deduction that I can claim under section 80DD?

Q: What is the amount of deduction that I can claim under section 80DD for a dependent who is a person with disability or a person with severe disability?

 

Ans: If you incur any expenditure on the medical treatment of a dependent “person with disability“, the amount of deduction that you can claim is Rs.50,000 from GTI, irrespective of the actual expenditure.

 

For a dependent “person with severe disability” the amount of deduction that can be claimed is Rs.1,00,000, irrespective of the actual expenditure.

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What are the consequences if a person with disability dies?

Q: What are the consequences if a person with disability dies before the person who had taken the scheme for him?

 

Ans: If a handicapped dependent predeceases the individual or member of HUF who had taken the scheme for him, the amount equal to the amount paid or deposited shall be treated as income of the year in which such money is received by the individual.

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Who can claim deduction under Section 80DDB?

If you are a resident of India and either an Individual or HUF, you can claim deduction under section 80DDB.

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What are the payments for which I can claim deduction under 80DDB?

If you have incurred any expenditure for the treatment of some specified diseases either for yourself or for any person who is dependent on you for his support and maintenance, you can claim deduction under section 80DDB.

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What is the essential requirement for claiming deduction under 80DDB?

Deduction under section 80DDB can be claimed only if you furnish the relevant certificate in a prescribed form (FORM 10-I) from the doctor of a government hospital.

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What is the amount of deduction which I can claim under 80DDB?

You can claim deduction under section 80DDB for the actual amount spent or Rs. 40,000, whichever is less. If the person for whose treatment the expenditure is incurred is a senior citizen, the amount of deduction is the actual amount spent or Rs. 60,000 whichever is less.

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What are the diseases for which I can claim deduction under 80DDB?

You can claim deduction for neurological disease, cancer, urological diseases, and any disease which requires treatment from hematologist or immunologist. For claiming deduction, you need to furnish a certificate in form 10-I from a doctor of the government hospital.

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Can the amount of deduction under 80DDB be reduced by any amount received?

Q: Can the amount of deduction under section 80DDB be reduced by the amount received from any insurance company for the medical treatment of the person?

 

Ans: The amount of deduction allowed under section 80DDB shall be reduced by the amount received from the insurance company or reimbursed by the employer.

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Who can claim deduction under section 80E?

You can claim deduction under section 80E only if you are an individual.

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What are the payments for which I can claim deduction under 80E?

If you have paid any amount towards the repayment of interest on the loan taken for your own higher studies or for any of your relatives, you can claim this amount as deduction under section 80E.

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Who all can I claim deduction under 80E for?

You can claim deduction under section 80E for the repayment of loan taken for your own higher education or for your relatives (your spouse, your children, and your student who is under your legal guardianship).

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Can I take a loan from any person to claim deduction under 80E?

You can claim deduction under section 80E only if you have taken loan from any financial institution or any approved charitable institution for your own higher education or for your relatives and the repayment of interest on the loan must have been made out of your taxable income.

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What is the period for which I can claim deduction under 80E?

You can claim deduction under section 80 E for eight years starting from the year in which you start paying interest on loan, or for the period until the interest on loan is paid in full, whichever is earlier.

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Can I claim deduction under 80E for a part time course?

Q: I have taken a loan for part time course of engineering. Can I claim deduction under section 80E?

 

Ans: No, you can not claim deduction for a loan taken for a part time course under section 80E.

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Does the term “higher education” refer to higher education in India only?

Q: Does the term “higher education” refer to higher education in India or higher education abroad as well?

 

Ans: For the purpose of section 80E, 'higher education' means education whether in India or outside India.

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What are the necessary conditions to be satisfied to claim deduction under 80G?

The necessary conditions to claim deduction under section 80G are: donations must have been paid as "sum of money” whether in cheque or cash, and not in kind. Donation must have been paid to a specified fund or institution with the production of proper proof of payment.

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Who can claim deduction under section 80G?

Deduction under section 80G can be claimed by all assessees, whether a company or non company.

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What is the amount of deduction under section 80G?

In some cases deduction is allowed to the extent of 100% of donation, and in other cases, 50% of donation. The deduction can be done with or without applying qualifying limit.

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What donations qualify for deduction under section 80G?

Q: What are the kinds of donations which qualify for 50% of donations without qualifying limit as deduction under the section 80G?

 

Ans: Donations to: Jawahar Lal Nehru Memorial Fund, Prime Minister’s Drought Relief Fund, National Children's Fund, Indira Gandhi Memorial Trust, Rajiv Gandhi Foundation, etc.

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What donations (50% category) qualify for deduction under section 80G?

Q: What are the kinds of donations which qualify for 50% of donations without qualifying limit as deduction under the section 80G?

 

Ans: Donations to: Jawahar Lal Nehru Memorial Fund, Prime Minister’s Drought Relief Fund, National Children's Fund, Indira Gandhi Memorial Trust, Rajiv Gandhi Foundation, etc.

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What donations (100% category) qualify for deduction under section 80G?

Q: What are the kinds of donations which qualify for 100% of donations without qualifying limit as deduction under the section 80G?

 

Ans: Any payment to any fund other than those that qualify under the 50% category are eligible for deduction under 100% categories.

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What donations (100% category with qualifying limit) qualify for deduction?

Q: What are the kinds of donations which qualify for 100% of donations, with qualifying limit as deduction under the section 80G?

 

Ans: Donations promoting family planning, or any amount of donation by a company for development of infrastructure of sports and games or for sponsorship of games to any association as notified by the Central Government qualify for 100% of donations, with qualifying limit as deduction under the section 80G.

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What does the amount of deduction under section 80G consist of?

The amount of deduction available under the section 80G is aggregate of: donation eligible for 100% and 50% deduction without qualifying limit, donation eligible for 100% and 50% deduction with qualifying limit.

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What donations (50% category with qualifying limit) qualify for deduction?

Q: What are the kinds of donations which qualify for 50% of donations, with qualifying limit as deduction under the section 80G?

 

Ans: Donation promoting any charitable purpose other than family planning, donations for development of cities towns, donations for satisfying the need of housing accommodation, for promoting interests of minority community, for renovation or repair of such a place which has been declared as of historic, archeological or artistic importance, qualify for 50% of donations, with qualifying limit as deduction under the section 80G.

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Who can claim deduction under section 80GG?

Only an individual can claim deduction under section 80GG.

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When can I claim deduction under section 80GG?

You can claim deduction under 80GG if:

  1. You pay rent for your accommodation.
  2. You are a self employed person, or you are not getting any HRA or rent free accommodation if you are an employee.
  3. You, your spouse, or your children do not own any residential accommodation at place of work or place where you reside or carry business or profession.
  4. You have filed a declaration in the form 10BA along with the return of income.
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What is the amount of deduction which I can claim under 80GG?

The amount of deduction that you can claim is the least of the following:

  1. Rent paid less 10% of Adjusted total income
  2. 25% of adjusted total income
  3. Rs.2,000 per month.
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What is the adjusted total income under section 80GG?

The adjusted total income means

 

Gross Total Income

 

Less

 

Long Term Capital Gain,

 

Short Term Capital Gain of 10% category,

 

Deductions under sections 80C to 80U except section 80GG and income of foreign company.

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Who can claim deduction under section 80GGA?

An individual who does not have income under business and profession can claim deduction under section 80GGA.

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What are the payments that qualify for deduction under 80GGA?

The deduction under section 80GGA is available in respect of the following payments to any approved institute for:

  1. Scientific research.
  2. Research in social science or statistics.
  3. Carrying out any eligible project or scheme by a public sector company.
  4. Rural development or for implementation of rural development programmes.
  5. Carrying out programme of conservation of natural resources.
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What is the amount of deduction available under 80GGA?

The amount of deduction is 100% of the sum of payments that qualify for deductions under this section.

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What can be regarded as contribution to a political party?

Q: Can any payment given by a company to any person who can effect public support for a political party be regarded as contribution to a political party?

 

Ans: Yes, it can.

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Who can claim deduction under section 80GGC?

Deduction under section 80GGC can be claimed by any person except local authority and artificial judiciary person wholly or partly funded by Government, other than companies.

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What is the amount which qualifies for deduction under 80GGC?

Any amount paid to any political party or electoral trust by any person shall be allowed as deduction under section 80GGC.

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What is the amount of deduction under section 80GGC?

100% of the amount paid to any political party shall be allowed as deduction under section 80GGC.

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Who can claim deduction under section 80QQB?

A person who is a resident of India and an author of a book can claim deduction under section 80QQB.

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What are necessary conditions to be satisfied for claiming deduction under 80 QQB?

To claim deduction under section 80QQB, the book should be a work of literary, artistic, or scientific in nature. There must be an income. The income can either be in the form of royalty or copyright fees or as lump sum amount received for the assignment or grant of any of the interests in the copyright of the book.

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What is the amount of deduction under section 80QQB?

The amount of deduction shall be either 100% of such income or Rs.3,00,000 whichever is less.

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What is the amount that can be considered as income received from royalty?

Q: What is the amount that can be considered as income received from royalty, if it is not received as lump sum amount?

 

Ans: If income from royalty or copyright fees is not received as lump sum money, such an income (before deducting expenses towards earning it) in excess of 15% of the value of books sold during that year should be ignored.

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Can “author” include joint author?

Author, for the purpose of section 80QQB, includes joint author.

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What are not included in Books?

Books shall not mean brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets and books for school.

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Who are entitled to deduction under section 80RRB?

An individual who is a resident of India and also a patentee can claim deduction under section 80RRB.

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What are necessary conditions I need to satisfy for claiming deduction under 80RRB?

The necessary conditions you need to satisfy for claiming deduction under section 80RRB are:

  1. Patent must have been registered on or after 1-4-2003 under the Patents Act, 1970.
  2. The GTI includes royalty for patents.
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What is the amount of deduction that I can claim under 80RRB?

The amount of deduction you can claim under section 80RRB is 100% of the royalty amount or Rs.3,00,000, whichever is less.

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Can income of royalty from patent exceed amount settled as per License?

Q: Can my income of royalty from patent exceed the amount settled as per the terms and conditions of License, when a compulsory license is granted?

 

Ans: No. When a compulsory license is granted, your income by way of royalty, for the purpose of deduction, shall not be more than the amount of royalty under the terms and conditions of the License.

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Is furnishing of certificates necessary for claiming deduction under 80RRB?

Yes.

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What does royalty with respect to patent include?

Royalty with respect to patent means consideration for transfer of rights and imparting of information for the use of patent, or for rendering any related services.

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What does royalty with respect to patent not include?

Royalty on patent does not include any consideration in the form of capital gains or consideration for the sale of product with the use of patented process or patented article.

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When can I claim deduction under section 80U?

You can claim deduction under section 80U, only if you are an individual who is a resident of India and have some disability. A certificate from a medical authority regards to that should be furnished along with the Return of Income.

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What is the amount that I can claim as deduction under 80U?

If you are a person with disability, you can claim deduction up to Rs. 50,000. If you are a person with severe disability, you can claim deduction up to Rs. 1,00,000.

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Can I claim exemption under 80G without the proof of payment?

No, the deduction under the section 80G cannot be claimed without submitting the proof of payment. However, if proof submitted in the form of receipt is defective (e.g. receipt without revenue stamps), that does not disqualify donation from being claimed as a deduction.

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Can I claim deduction under 80GGA if I have income from a business?

Any assessee whose Gross Total Income includes income from business and profession, cannot claim deduction under section 80GGA.

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When can I claim deduction for donation for scientific research?

Q: I donated to an approved university for carrying on scientific research. Subsequent to the donation, approval of the university was withdrawn. Can I still claim deduction?

 

Ans: Yes, you can still claim deduction under section 80GGA if the approval of the university carrying some particular research has been withdrawn subsequent to the payment made by you.

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Can a person with disability earning handsome income claim deduction under 80U?

Q: I am a person earning handsome money and getting yearly increments. Can I claim deduction under section 80U?

 

Ans: Deduction under section 80U can not be denied if the disabled person is employed and earning an income. Handsome yearly earnings will not affect his disability.

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Can certificate under 80U be issued by a doctor who is not a Government employee?

Under section 80U, a doctor of any kind can issue the certificate even if he/she is not working in a Government hospital, given he is working in a hospital or institution specified for people with disability.

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Does tuition fee paid for children by HUF qualify for deduction under 80C?

Deduction for payment of tuition fees can only be claimed by an individual. If any member of an HUF pays any amount for tuition fee, he/she will not get the benefit of deduction under section 80C.

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Can I claim deduction for repayment of housing loan and interest thereon under 80C?

Under section 80C, a person can claim deduction only for the repayment of principal amount of a housing loan. The deduction for payment of interest on such a loan can be claimed under income from house property.

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What is the minimum holding period of a house property?

Q: What is the minimum holding period of a house property in respect of which I have claimed deduction under section 80C?

 

Ans: If you transfer the house property before five years from the end of the financial year in which possession was obtained by you, no deduction can be claimed in the year in which property is transferred. Also, deduction claimed in earlier years shall be treated as income of the year in which the property is transferred.

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What is the difference between deductions under sections 80DD and 80DDB?

Q: What is the difference between deduction under sections 80DD and 80DDB as both are for the purpose of medical treatment?

 

Ans: Section 80DD is for the maintenance including medical treatment of a dependent person with disability. Section 80DDB is for your own or dependent’s medical treatment for a specified disease. Also, deduction under section 80DD is given irrespective of the actual amount spent, but deduction under section 80DDB is either the actual amount or the limit prescribed, whichever is less.

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What happens if Gross Total Income includes only Long Term Capital Gain?

Q: If Gross Total Income (GTI) only includes Long Term Capital Gain, what is the amount of deduction that can be claimed?

 

Ans: If Gross Total Income (GTI) includes Long Term Capital Gain only, GTI shall be considered as nil. If GTI is nil, no deductions can be claimed.

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Are deductions under 80IA to 80U allowed from the Net Income?

Yes, deductions under sections 80IA to 80U are provided out of net income i.e. income arrived after other deductions, and adjusting current year and brought forward losses.

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What is the difference between sections 80C and 80CCC?

Q: What is the difference between 80C and 80CCC in respect to the amount paid towards annuity plan of LIC?

 

Ans: Under section 80C, amount can be paid out of income not chargeable to tax, but under section 80CCC amount can be paid only out of income chargeable to tax.

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When can I claim deduction for Life insurance premium?

Q: Can I claim deduction for Life insurance premium paid for my parents or my spouse's parents?

 

Ans: No, you cannot claim deduction for Life insurance premium paid for your parents or your spouse’s parents.

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Can I claim deduction for Mediclaim premium paid for my spouse's parents?

You can claim deduction for mediclaim premium paid only for your parents, and not for your spouse's parents.

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Whose status is considered for claiming deduction for mediclaim premium paid?

Q: Whose status is considered for deciding whether the limit of deduction will be the general limit or that applicable to senior citizens?

 

Ans: The status of the person for whom the Medi claim premium is paid, is to be considered for deciding the deduction limit applicable.

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Can I claim Medi claim benefit for my dependent brother?

Q: Whose status is considered for deciding whether the limit of deduction will be the general limit or that applicable to senior citizens?

 

Ans: Any Medi claim premium paid for a dependent brother shall not qualify for deduction under section 80D.

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What is the difference between sections 80D, 80DD and 80DDB?

Section 80DD deductions are available for medical treatment of a dependent being a person with disability.

 

Section 80DDB deduction is available for treatment of a specified disease for him or dependents.

 

Section 80D speaks about any amount paid as insurance on the health of either the individual or spouse or dependent children or parents.

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Can I claim deduction for insurance premium of my grandparents ?

Q: Can I claim deduction under sections 80C, 80D, 80DD, 80DDB for an amount paid as insurance premium or spent for the medical treatment of my grandparents or my spouse’s grandparents?

 

Ans: No, you cannot claim deduction for premium paid or expenditure incurred on the medical treatment of your grandparents or your spouse’s grandparents.

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Can I pay life insurance premium under 80C in cash?

You can make LIC premium payment through any mode.

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What comparisons are made to decide amount deductible under 80DDB?

Q: For the purpose of deciding the amount deductible under section 80DDB where against actual expenditure incurred some money is recovered either from the insurance company or the employer, whether comparison is made between either (Actual expenditure less money recovered) and limits or (Actual expenditure or limits whichever is minimum) less money recovered?

 

Ans: First, comparison between actual expenditure and limit will be made. After selecting the minimum out of the two, deduction for the money recovered will be made.

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What date regarding cheques is considered for claiming deductions?

Q: Which of the two dates is important for the purpose of claiming deduction- the date of issue of cheque or the date on which it is realized?

 

Ans: The date of issue of cheque is considered for deciding whether an amount qualifies for deduction or not.

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Does donation necessarily need to be made out of income chargeable to tax?

Q: Does donation necessarily need to be made out of income chargeable to tax and that too for the current year?

 

Ans: For claiming deduction under section 80G, donations can be made either out of the current year income or earlier income whether chargeable to tax or not.

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Can I claim amount of tuition fee paid for day care or play school as deduction?

Yes, you can claim the amount of tuition fee paid for day care or play school as deduction under section 80C.

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How can I claim deduction under section 80DD?

Q: I am married for last 7 years. I have a sister who is mentally retarded. She is dependent on me for support and maintenance. Can I claim deduction under section 80DD?

 

Ans: Yes, you can claim deduction under 80DD if your sister has not claimed such deduction under 80U .

 

Under Sec 80DD you can claim deduction of Rs 50000 or Rs 100000 if you have spent money on the medical treatment of a person who is dependent on you and is a person with disability.

 

Mental retardation is included in the definition of Disability.

 

If you wish to claim higher deduction you need to get a certificate of disability from a chief medical officer in a government hospital.

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Why do I need to have a PAN?

It is mandatory to quote PAN on return of income and all correspondence with any income tax authority. It is mandatory to quote PAN on challans for any payments due to the Income Tax Department. It is also compulsory to quote PAN in all documents pertaining to financial transactions notified from time to time by the Central Board of Direct Taxes. Some such transactions are sale and purchase of immovable property and payments in cash of amounts exceeding Rs. 25,000/- to hotels/restaurants/in connection with travel to any foreign country. It is also mandatory to mention PAN for obtaining a telephone or cellular connection. Likewise, PAN has to be mentioned for making a time deposit exceeding Rs. 50,000/- with a Bank or post office or depositing cash of Rs. 50,000/- or more in Bank. It is the statutory responsibility of a person receiving documents relating to economic or financial transactions notified by the CBDT to ensure that PAN has been duly quoted in the document.

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Who must have a PAN?

The following persons must have a PAN:

  1. All existing assessees or taxpayers or persons who are required to furnish a return of income, even on behalf of others, must obtain PAN.
  2. Any person, who intends to enter into financial transaction where quoting PAN is mandatory, must also obtain Pan.
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Can I obtain or use more than one PAN?

No. Obtaining or possessing more than one PAN is against the law.

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How should I apply for PAN?

Application for fresh allotment of PAN can be made through Internet. Further, request for changes or correction in PAN data or request for new PAN card (for an existing PAN) may also be made through Internet, by visiting https://tin.tin.nsdl.com/pan/index.html

 

If an application for allotment of PAN is submitted through Internet and payment made through a 'nominated' credit card, the PAN is alloted on priority and communicated through email.

 

The Income Tax department has also authorized UTI Investor services Ltd (UTIISL) to set up and manage IT PAN service Centers in all cities or towns where there is an Income Tax office and National Securities Depository Limited (NSDL) to dispense PAN services from TIN Facilitation Centers. For convenience of PAN applicants in big cities, UTIISL has set up more than one IT PAN Service Centers and likewise there are more than one TIN facilitation Centers. PAN application should be made only on form 49A. A PAN application (Form 49A) can be downloaded from the website of Income Tax department or UTIISL or NSDL (www.incometaxindia.gov.in, www.utiisl.co.in or tin.nsdl.com) or printed by local printers or photocopied (on A4 size 70 GSM paper) or obtained from any other source. The form is also available at IT PAN Service Centers and TIN Facilitation centers.

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Is it compulsory for me to quote PAN on the return of income?

Yes, it is compulsory to quote PAN on return of income.

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Can the Form 49A, used to apply for PAN, be obtained from anywhere?

Yes, PAN application may be made on Form 49A obtained from any source including IT PAN Service Centers or TIN Facilitation Centers. For instance, a PAN application may be made on form downloaded from the website of Income Tax department or UTIISL or NSDL, or on a form printed by local printers, or a photocopy of download or printed form.

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Can I apply for PAN online?

Yes, application for fresh allotment of PAN can be made through the Internet. Further, request for changes or correction in PAN data or request for new PAN card (for an existing PAN) may also be made through the Internet. For more details visit www.tin-nsdl.com.

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How do I get a PAN allotted quickly (TATKAL)?

If an application for allotment of PAN is submitted through the Internet and payment made through a 'nominated' credit card, the PAN is allotted on priority and communicated through email.

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How do I find an IT PAN service center or TIN Facilitation center?

Location of IT PAN Service centers or TIN Facilitation centers in any city may be obtained from the local Income Tax office or any office of UTI/UTIISL/NSDL in that city. It can also be found on their websites - www.incometaxindia.gov.in, www.utiisl.co.in, and NSDl http://tin.nsdl.com.

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What services are provided by IT PAN service centers or TIN Facilitation centers?

IT PAN service centers or TIN Facilitation centers will supply PAN application forms (Form 49A) and forms for 'Request for new PAN card or/and changes in PAN data'. They assist the applicant in filling up the form, collect the filled form and issue acknowledgement slip. After obtaining PAN from the Income Tax department, UTIISL or NSDL, as the case may be, will print the PAN card and deliver it to the applicant.

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What happens if I submit incomplete Form 49A?

IT PAN Service Centers or TIN facilitation centers shall not receive any incomplete/deficient PAN application. However, these centers will assist applicants to correctly fill up form 49A or 'Request for new PAN Card or/and changes in PAN Data', as the case may be.

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What documents and information do I have to submit for Form 49A?

Q: What documents and information do I have to submit along with the application for Form 49A?

 

Ans: You need to submit the following documents and information:

  1. Individual applicants will have to affix one recent, coloured photograph (Stamp Size:3.5 cms X 2.5 cms) on Form 49A;
  2. Any one document listed in rule 114 must be supplied as proof of 'Identity' and 'Address'; and
  3. Designation and code of the concerned assessing officer of the Income Tax Department will have to be mentioned in Form 49A.
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Which documents will serve as proof of 'identity' for individuals and HUFs?

Q: Which documents will serve as proof of 'identity' in case of individual applications, including minors and HUF application?

 

Ans: The copy of any of the following documents can serve as proof of 'identity' in case of individual applications:

  1. School leaving certificate
  2. Matriculation certificate
  3. Degree from a recognized educational institution
  4. Depository account
  5. Credit card
  6. Bank account
  7. Water bill
  8. Ration card
  9. Property tax assessment order
  10. Passport or
  11. Voter identity card
  12. Driving license
  13. Certificate of identity signed by an MP or an MLA or a municipal councilor or a Gazetted officer.

In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of such minor shall serve as proof of Identity. In case PAN application is made on behalf of an HUF, any of the above documents in respect to Karta of the HUF will serve as proof of Identity.

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What will serve as the proof of 'address' for individuals and HUFs?

Q: What will serve as the proof of 'address' for individual applicants, including minors and HUF applicants?

 

Ans: The copy of any of the following documents can serve as proof of 'address' in case of individual applications:

  1. Electricity bill
  2. Telephone bill
  3. Depository account
  4. Credit card
  5. Bank account
  6. Ration card
  7. Employer certificate
  8. Passport
  9. Voter identity card
  10. Property tax assessment order
  11. Driving license
  12. Rent receipt
  13. Certificate of address signed by an MP/MLA/Municipal councilor/Gazetted officer.

In case the PAN applicant is a minor, any of above documents of any of the parents or guardian of the minor shall serve as proof of address. In case PAN application is made on behalf of an HUF, any of the above documents in respect to Karta of the HUF will serve as proof of address.

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What documents will serve as proof of Identity and Address for other applicants?

The copy of any of the following documents can serve as proof of identity and address in case of other applicants:

  1. Certificate of registration issued by the registrar of companies/firms
  2. Partnership deed/Trust deed
  3. Certificate of registration number issued by charity commissioner
  4. Certificate of registration number issued by registrar of Co-operative Society
  5. Any other document originating from any central or state government department establishing identity and address.
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How do I find 'Assessing officer code'?

Assessing officer code may be obtained from the Income Tax Office where you submit your return of income. Applicants who have never filed return of income may find out assessing officer code with the help of IT PAN service center or TIN facilitation center or jurisdictional Income Tax Office.

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Is it necessary to attach a photograph while making an application for PAN?

A photograph is compulsory only in case of 'individual' applicants.

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What is the procedure for applicants who cannot sign?

In such cases, left hand thumb impression of the applicant should be affixed at the place meant for signatures. It should then be attested by a magistrate or a notary public or a Gazetted officer, under official seal and stamp.

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Is father's name compulsory for female (including married/ divorced/ widow) applicants?

Yes, father's name is required to be filled in the PAN application (Form 49A). Female applicants, irrespective of marital status, should write only their father's name in the PAN application.

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Is it compulsory for me to mention telephone number on Form 49A?

Telephone number is not compulsory. If provided, it may help in faster communication.

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Who can apply on behalf of a non-resident, minor, lunatic, idiot, and court of wards?

Section 160 of IT Act, 1961 provides that a non-resident, a minor, lunatic, idiot, court of wards and such other persons may be represented through a representative assessee. In such cases, application for PAN will be made by the representative Assessee.

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I had applied for PAN, but have not got any response. How do I know my PAN now?

Please contact the Aaykar Sampark Kendra (ASK) at 0124-2438000 (or 95124-2438000 from NCR) or visit the www.incometaxindia.gov.in and go to 'know your PAN'.

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What are the charges I need to pay at IT PAN service centers or TIN facilitation centers?

UTIISL and NSDL have been authorized to collect Rs.60 + service tax as application and this includes cost of a tamper proof PAN card. This amount will have to be paid in cash at IT PAN service center or the TIN facilitation center.

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Do I need to apply for a PAN when I move or get transferred from one city to another?

Permanent account number (PAN) is a permanent number and does not change during lifetime of the PAN holder. Changing the address or city, though, may change the Assessing officer. Such changes must, therefore, be intimated to the nearest IT PAN service center or TIN facilitation center for required correction in the PAN Databases of the Income Tax department. These requests will have to be made in a form for 'Request for new PAN Card or/ and changes in PAN Data'.

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What should I do when I don't receive my PAN Card even after one month of applying?

Q: I had applied to UTIISL/ NSDL a month ago but I have not received my PAN card and I have to file my return of income. What should I do?

 

Ans: Please contact Aaykar Sampark Kendra (0124-2438000 or 95124-2438000 from NCR) or www.incometaxindia.gov.in or send an email to pan@incometaxindia.gov.in.

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Will the existing PAN cards issued by the department remain permanently valid?

All PAN allotted and PAN card issued by the department will remain permanently valid. Anybody who has been allotted a PAN need not apply again.

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I-T Department has already issued me a PAN card. Can I obtain a new tamper-proof PAN card?

For obtaining the tamper proof PAN card, an application will have to be made in the form for 'request for new PAN Card or/and PAN changes in PAN data' to IT PAN service center or TIN Facilitation center, in which existing PAN will have to be indicated and old card surrendered. The payment of Rs.60 + Service Tax as applicable, will also have to be made.

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I had applied for PAN and have received PAN number, but not the card. How do I get it?

Apply in the form for 'request for new PAN card or/ and changes in PAN data' at any IT PAN service center or TIN facilitation center quoting the PAN allotted to you.

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How will the new PAN card be delivered to me?

The UTIISL or NSDL, as the case may be, will ensure delivery of new PAN card at the address indicated by you in the PAN application form or form for 'request for new PAN card or/ and changes in PAN Data'.

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I want to pay taxes today, but I do not have a PAN. What do I do?

It takes about 15 days to get a new PAN allotted. However, PAN can be obtained in around 5 days if the application is made through internet and the processing fee is paid through credit card.

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How do I claim refund for TDS deducted due to late submission of PAN?

Q: I submitted my PAN number 6 months after joining my company. In the meantime, the company deducted 20% TDS and deposited it. Can I get the refund of TDS deducted by the employer, if my annual income is below taxable limits?

 

Ans: The company can file the "correction statement" and provide your PAN number in the correction statement. You will need to file income tax return to claim the refund even if your annual income is below taxable limits.

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What do I do if I have been allotted more than one PAN?

If you have been issued more than one PAN, you can retain any one of the numbers and surrender the others through a letter addressed to the jurisdictional Assessing officer. It is illegal to have two PAN numbers and you may even have to pay a penalty of Rs. 10,000 for such offense.

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Where can I apply for PAN?

The Income Tax department has authorized UTI Investor Services Ltd (UTIISL) to set up and manage IT PAN service centers in all the cities or towns where there is an Income Tax office and National Securities Depository Limited (NSDL) to dispense PAN services from TIN Facilitation Centers. For the convenience of PAN applicants in big cities, UTIISL has set up more than one IT PAN Service Centers and likewise there are more than one TIN facilitation Centers. PAN application should be made only on form 49A. A PAN application (Form 49A) can be downloaded from the website of Income Tax department or UTIISL or NSDL (www.incometaxindia.gov.in, www.utiisl.co.in or tin.nsdl.com) or printed by local printers or photocopied (on A4 size 70 GSM paper) or obtained from any other source. The form is also available at IT PAN Service Centers and TIN Facilitation centers.

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How can PAN details furnished by someone be verified?

A facility for verifying PAN is available on the website of the Income Tax department. PAN can be verified by filling the details mentioned in the PAN card such as name of the person and his date of birth. Visit the link https://incometaxindiaefiling.gov.in/portal/knowpan.do.

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What is Tax Planning?

The purpose of tax planning is to provide an online tool to the salaried employees so that they can instantly understand and compute the tax impact of various financial actions such as salary composition, house property income, home loan, investments, sale/purchase of assets, gifts, and interest-bearing deposits.

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When should I plan my taxes?

Though you can plan your taxes through out the year, employees generally make the 80C investments from December to March every year. The other tax planning decisions such as house property, asset sale/purchase are made through out the year.

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If I purchase Tax Planning, will I be able to e-file my return?

Yes. Income Tax E-filing is included as a default feature.

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I stay with my parents. Can I claim HRA?

Yes, you can claim the exemption of HRA if you are staying with parents and paying rent to them.

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What is basic salary?

Basic salary is the part of gross salary, which is fully taxable. It does not include any type of benefits like perquisites, allowances and bonus. It is taken as a base for calculating HRA (House Rent Allowance), RFA (Rent free accommodation), PF (Provident Fund), gratuity etc.

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How to calculate basic salary?

Q: What percentage of my gross salary is my basic salary? Is there a fixed law that governs the basic percentage?

 

Ans: Your employer decides the percentage of gross salary that is to be taken as basic salary. There are no laws governing any fixed percentage for the same.

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How is a higher basic salary beneficial?

Your employer’s contribution to provident fund (12% of your basic salary) and to gratuity (4.81% of basic) increases with your basic salary. As a result, the higher your basic pay, the greater part of your income will be tax free. However, it leads to lower take home.

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Does my basic salary influence the House Rent Allowance (HRA) I get?

Yes, your basic salary will influence your HRA. House rent allowance exemption is limited to 50% of basic salary if the rented accommodation is in Delhi, Mumbai, Chennai or Kolkata. For all other cities, the HRA exemption is limited to 40% of basic salary.

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What is the role of basic salary in taxable income?

Q: Does it make any difference in my taxable income if my percentage of basic salary is too low as part of my CTC?

 

Ans: Lower the portion of your salary under basic salary, the higher will be the percentage of your salary that is taxable.

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What's the benefit of higher HRA in CTC?

Q: Is it beneficial to have a higher HRA in CTC? What happens if I am not living in rented accommodation?

 

Ans: The benefit from HRA depends on actual rent paid by you. In case you are not paying any rent, the complete HRA will be taxable.

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What are the conditions for claiming HRA?

  1. You should be living in a rented house.
  2. House should not be owned by you or your spouse (i.e. it can be owned by your parents)
  3. Rent receipts and rent agreement have to be submitted to the employer.
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How is HRA exemption computed?

The least of the amounts arrived at by applying the following three conditions, is the amount that one can claim as HRA:

  1. Subtracting 10% of the basic salary from the rent paid by you (If Ram pays Rs 1000 as rent, Ram’s basic salary is Rs 5000. So, rent paid – 10% of basic = 1000 – 500 = Rs 500)
  2. HRA received by the employee (Ram’s company pays Rs 1000 as HRA)
  3. 50% of the Basic salary (50% of Ram’s basic = 0.5 x 5000 = Rs 2500)

In this case, Ram can claim Rs 500 as HRA exemption.

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Can I get HRA exemption if I own a house, but am staying on rent in the same city?

HRA exemption is not allowed easily in such cases. However, it can be allowed if you can provide the proof that both the houses have been used for your family members, due to the long distance between office and residence.

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Can I claim both HRA and home loan deduction from my employer?

Yes, both HRA and home loan deduction can be claimed by you simultaneously. You can easily claim HRA exemption if you own a house in a different city. In exceptional circumstances, exemption may be granted even if you own a home in the same city.You just need to legally justify the cause of living on rented accommodation.

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Can I claim HRA and RFA together?

Q: Can I claim both HRA and RFA (rent free furnished accommodation provided by employer) for the same period?

 

Ans: No, you cannot claim the HRA and RFA both at one time.

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What if I am staying in a rented house but not receiving HRA from employer?

If you stay in a rented house, but your employer is not offering HRA, you cannot claim HRA exemption. You can claim deduction of 80GG up to Rs 2000 p.m.

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What are meal coupons?

Meal coupons are non-transferable coupons which can be purchased only from your office location. These coupons can be used only at eating joints where they are accepted.

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Can I use meal coupons even after leaving the current company?

Yes, you can use them even after leaving the current company, if they can be used outside office.

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When are food coupons taxable?

A food coupon whose value exceeds Rs 50 per meal is taxable. You can have Rs 100 as tax free perquisite for 2 meals per day. Food coupons are tax free perquisites for working days only.

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Who issues food coupons?

Sodexo and Accor are some of the companies providing meal coupons to employees through their employers.

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How to use food coupons?

Q: I take lunch from my office’s food coupons and dinner from outside. Can I show the deduction from there as well?

 

Ans: The law states that 2 meals per day (expense for each meal cannot exceed Rs 50) are exempt from tax.

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Do I need to submit the receipt of phone bills on monthly basis or annual basis?

There is nothing particularly mentioned in law for submitting the phone bills on monthly basis or annual basis. But, it is easier for the employer to maintain records and to reimburse the payment if bills are submitted every month.

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How to use personal phone for deductions?

Q: I use two cell phones, one from my company and the other is my personal phone. Can I show deductions for both?

 

Ans: No, you can only enjoy the tax free perquisites for the company-provided cell phone, to be used for official purpose. Your personal phone is not authorized to you by the company. Hence, it will be taxable.

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What are the limits on Phone Bills?

Q: What is the limit for phone bill expenses that I can claim reimbursements for? What happens if I exceed this limit?

 

Ans: There is no such limit defined by law. Phone bills of reasonable amount may be claimed. There are limits set by the corporate internally. Usually, one cannot get exemption over this limit even if the expenses incurred are more.

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What if my company doesn’t provide any cell-phone facility?

Q: What if my company doesn’t provide any cell-phone facility? In that case, should I ask for a cell-phone or can I include the phone bills of other members of my family to claim reimbursement?

 

Ans: It is not necessary that a separate phone is to be used for claiming reimbursement of phone bills. The objective of the perquisite is to reimbursement of expenses made for official purposes.

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What is the amount not taxable under medical reimbursement?

Actual medical reimbursement for tax exemption is Rs 15000 per year. Even if the medical expense is more than Rs 15,000, you will get exemption on Rs. 15000- only and the balance amount will be taxable. To claim reimbursement, you are required to submit the original medical bills to your employer. Failing to do so will make the entire medical expense taxable.

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How to claim Medical Reimbursement in case of Mediclaim?

Q: I have a mediclaim policy and my company has entitled me to medical reimbursement. The doctor’s original bills are with the mediclaim provider. Can I use photocopies of the bills and claim medical reimbursement?

 

Ans:

  1. If your company policy entitles you to health benefits in the form of Medical Reimbursement, you need to submit original bills to claim the benefit. Photocopies of the bill are not accepted to ensure that an employee does not claim reimbursement multiple times (from both the employer as well as the insurance company), thereby avoiding fraudulent claims.

  2. If the medical insurance company (providing mediclaim) does not reimburse or partly reimburses the expense, it may be considered that the insurance company will return all the original bills back to you. You can then submit these bills to your employer and claim medical reimbursement.
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What is the difference between mediclaim and medical reimbursement?

Medical Reimbursement is for medical expenses incurred by an employee on day-to-day medical needs like medicines. Only the bills are required to claim it.

 

In contrast, mediclaim is an insurance policy. To claim anything from a mediclaim policy, hospitalization is necessary. The amount of expenses is directly remitted to the hospital and not to the employee.

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Are there any rules or policies that govern medical reimbursement in a company?

Usually, medical reimbursement is a component in the CTC structure. The government provides tax benefit for the expenses made towards medical treatments and purchase of medicines for self and dependents. Original bills have to be submitted by the year-end to claim this tax benefit. The maximum amount exempted is Rs. 15000/- per year.

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Will monthly claim of Medical Reimbursement be taxable?

Q: I want to claim my medical reimbursement every month so that I can use it as lump sum later. Will the monthly reimbursement be taxable?

 

Ans: Yes, you can claim up to Rs 1250 as medical reimbursement on a monthly basis (as prescribed by law).Medical bills for the financial year can be submitted by January end so that the amount for which bills are not provided is made taxable. The corresponding tax amount is then deducted from the Feb/March salaries.

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What is the liability of Medical Reimbursement for Family Members?

Q: I have some medical bills which I want to reimburse. One bill has my father’s name; another has my mother’s name, etc. So I want to know that on whose names I can claim for reimbursement.

 

Ans: As per tax law you can enjoy the benefit of tax free reimbursements if the treatments are of your:

  1. self
  2. spouse and children
  3. dependents (parents, brother and sister)

So, the medical bills can be in the name of any of the above.

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What kind of annual gifts come under the tax free perquisites?

Any kind of gift which is not in cash and not convertible into money (like gift cheques) is a tax free perquisite. It can be any voucher or token.

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What is the limit of tax free gifts from employer?

Gifts exceeding the aggregate of Rs 5000 per annum are taxable.

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Can all corporate gifts for different occasions be treated as non-taxable?

Yes,all corporate gifts received on different occasions are treated as non-taxable, if the aggregate does not exceed Rs 5,000.

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How to claim exemption on gifts from company?

Q: I receive gift vouchers and movie tickets from my organization. Can I show it as deductions from my salary?

 

Ans: Yes, any gift which you have received from your employer in kind, not exceeding Rs 5000 can be shown as tax free perquisites. The obligation of declaring gifts as perquisites in Form 16 is on the employer.

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What is the non-taxable limit for conveyance allowance?

Any amount which is spent on conveyance for official purpose is non taxable. There is no limit to this reimbursement in law.

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For claiming conveyance allowance, do I need to provide bills?

Yes, you need to show the bills for getting expense incurred on conveyance for official purpose.

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What are the factors considered while calculating Conveyance Allowance?

Q: What factors are taken while calculating conveyance reimbursement for private vehicle for official use? Can I include wear-and-tear expenses and insurance expenses?

 

Ans:

  1. Employee needs to maintain the complete details (i.e. mileage,expenditure incurred) of journey undertaken for official purpose.
  2. Employer has to give a certificate that the expenditure was incurred for official purpose only.

Wear and tear expenses (i.e. 10% of cost) including servicing cost and insurance premium paid for the vehicle can be included as reimbursement claims.

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My employer has decided to cut my salary by 10%. Will my basic salary be reduced too?

Yes, the basic salary will reduce as a result of the salary cut. In fact, every component of your salary should reduce by 10% if the salary is cut by 10%.

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What is the minimum basic salary that is entitled to an employee?

The law has not defined what must be the minimum basic salary. The general practice is that basic salary comprises at least 25% of the gross salary.

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How does the TaxOptimizer Report look like?

To download a sample of TaxOptimizer Report, click here.

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Tax Back FAQ

Q1: What is the purpose of Tax Back Offer?

 

Ans: There are two specific purposes of Tax Back Offer:

  1. To encourage early filing of tax returns – our past experience has been that most of the taxpayers file their returns in the last two weeks of July. This brings our servers under immense load. To smooth the traffic of online return filing, we couldn’t think of a better incentive than the Tax Back Offer to encourage early filing.

  2. To enlighten taxpayers about the dangers of filing with FREE agents – Many companies (banks, insurance companies, financial planning portals, mutual funds portals, commission agents, etc.) offer tax return filing without any cost. We firmly believe that there is no FREE LUNCH. By providing access of your data to these companies, you compromise the confidentiality of sensitive data. As a result, the widely prevalent mis-selling of financial products gets boost.
 

Q2: Is there anything for the customers who filed their returns prior to the beginning of Tax Back Offer?

 

Ans: While every offer is unique in nature, we are considering something special for those who filed their income tax return prior to Jul 11, 2011. Checkout this space for more details..

 

Q3: Do employees with salary below 5 lakh have to file the return?

 

Ans: Most of the employees below 5 lakh salary MUST file the tax return. The eligibility criteria for not filing tax returns are so strict that practically very few employees will be exempt from filing returns.

 

Read these two articles to get the complete picture:

  1. Income up to Rs 5 lakh: Exemption from filing I-T returns? No one can avail of it – Economic Times, Jul 4, 2011
  2. ITR Filing Exemption: Checklist for Salaried Taxpayers – TaxSpan, Jun 24, 2011
 

Q4: What is the vision/mission of TaxSpanner?

 

Ans: Visit Vision & Mission

 

Q5: Who is promoting TaxSpanner?

 

Ans:

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