Are you a salaried employee and a bit confused by how much tax your employer is deducting at source from your salary? If at all tax is deducted at source, do you know how to plan to save taxes?
Have you recently changed your employer and don't know how the fixed and variable component of your salary is taxed?
In a chat with readers on September 18, Get Ahead tax expert Mahesh Padmanabhan discussed these and other tax-saving and investment issues affecting the salaried employees, NRIs and self-employed professionals..
For those of you who missed the chat, here is the transcript.
Pradeep asked, Dear Mahesh..I have the idea that if NRI for more than 6 months, income is not taxable in india. If i gave the amount such as Rs 10 L to my father who is a govt . employee whether that will be taxble for him?
Mahesh Padmanabhan answers, Dear Pradeep, the parameters in defining the residential status of an individual is slightly complex and depends on the purpose of visit outside, timeline of the stay outside India etc. In your case if you are an NRI then the income earned outside India is not taxable in India and accordingly if you transfer the amount from outside India to India by way of remmittance through banking channel then the same is not taxable in India.
SHIVA asked, DEAR SIR I AM WORK IN PRIVATE FIRM - AS ASSOICIATE CONSULTANTS, THEY WER PAYING TO ME 30.5K AFTER DEDUCTION OF 10.33% TDS. YEARLY OF TOTAL TDS WILL APPORX-40K PL SUGGEST TO ME HOW CAN GET THE BACK TDS AMOUNT?
Mahesh Padmanabhan answers, Dear Shiva, in your case you would need to compile all relevant expenses incurred by you (including non cash expenses such as depreciation on car, computer, phone etc) and prepare a profit & loss account. The net amount of income needs to be evaluated for the taxability and thereafter file a return to claim refund if any. It would be better to use the services of a professional who could do this for you.
Swaraj asked, Hi, i am working in a private company my income is RS 250000 p.a and tax comes to around RS 25000 so please suggest me how to save tax i dont have any mediclaim or any kind of investment done at this movement?
Mahesh Padmanabhan answers, In case you have not availed of any of the section 80C investments then the max amt available is Rs. 1 Lakh. You would first need to decide the disposable amount available with you after meeting your regular exps and then plan out the investments in instruments such as PPF, ELSS Mutual funds, Insurance etc. It is best if you could do this regularly say on a monthly basis so as to avoid year end cash flow problems.
katz123 asked, Hi, I recently switched jobs and my previous company had already deducted Rs. 2000/- as Income tax and I joined my current company in August, when I spoke to the a/c's dept they said I need to submit rent receipts starting from August and not from April'07. I want to know why can't I submit the rent receipts from April'07 and they had also asked me to submit the agreement copy. Is it compulsory to submit the lease aggrement papers coz till now no company has asked me to do so? My total CTC is about 6 lacs out of which 4lacs is fixed. So on what amount is tax payable 4or 6lacs??
Mahesh Padmanabhan answers, Hi, your current employer is responsible for the salary disbursed by them and accordingly would not include the deduction for HRA from your previous employer. You could however, claim the same independantly in your income tax returns. As regards the lease agreement, certain organisations have defined rules to safeguard their tax documentations and you would need to respect that and provide the same to them. As regards the taxability of CTC, total salary is taxable whether in the form of cash component salary or in the form of perquisites.
rakesh asked, working in pvt.ltd.company.want to know that is the following expanses full amount considred while caculating FBT. Vehicle running exp. conveyance exp. staff welfare exp. conveyance allowance. sales promotion expanses. telphone exp. tour & travling exp(local+foreign) also pls write me that what is the percentage of fbt on these exp?
Mahesh Padmanabhan answers, FBT is payable by employers, the Fringe benefit percentage is generally 20% however for certain expenses it might be 50% (such as gifts etc) and for certain expenses it might be 5% (such as tour & travel). The tax rate of 33.99% is levied on this fringe benefit value.
worried asked, I have not received my refund of excess tax paid financial year 2004-2005 and 2005-2006 - assesment year were 2005-2006 and 2006-2007 how do i go about approaching concerned authority any website which informs us about of our refund thanks.
Mahesh Padmanabhan answers, Hi relax, you could write a letter to the PRO at your local ward office and follow up with them. In any case the government pays about 7% interest on the amount lying with them. As of now there are no such sites to track refund position.
hi asked, if i co own a home along with my father with me working and my father not working.can i pay house rent to father and claim HRA exemption? I have finished my home loan.
Mahesh Padmanabhan answers, The basic condition for you to avail HRA deduction is that you should not be staying in your own house and you should actually be paying rent. As you co-own the property you cannot claim benefit of HRA.
Vinod asked, I am booking for purchase of a house. The Construction is likely to complete by end of June 2009. Will I be eligible for Income Tax Benefit on Interest Paid during pre-construction period uptil completion?
Mahesh Padmanabhan answers, Hi Vinod, one condition to be satisfied in availing of deduction for housing loan interest of upto Rs. 1.5 lakh is that the construction of the house property should be completed within 3 years of borrowing the loan. Accordingly, you would need to collect the interest certificates for such pre-construction interest and claim them proportionately in 5 equal installments. However, this subject to the cieling of Rs. 1.5 Lakh interest.
dharmapal asked, sir, I am not filling my returns last 3 years. so what can i do?
Mahesh Padmanabhan answers, Dear Dharampal, you could file your returns for the last 2 years now. Financial year 2005-06 and 2006-07 can be filed upto March 31, 2008.
MBadri asked, Hello Sir, suppose I bought a house for 1 lakh in 1994 and sell it for Rs 3 lakh in 2007. What will be my tax obligation?
Mahesh Padmanabhan answers, You would first need to index the original cost using inflation index 259 and 551 (i.e. inflation index for FY 1994-95 & 2007-08 respectively). Accordingly, the indexed cost would be Rs. 212741. So Rs. 3 Lakh minus Rs. 2.13 Lakh is Rs. 0.87 Lakh which would be subject to long term tax @ 10% i.e Rs. 8,700. These are approx figures and you would need to check with a professional before you firm up these figures?
biplab asked, Hi! Me and my wife are working and both of us are having salary of around 10 lakhs.We intend to to buy 2 apartments to get the tax benefit. We are thinking of buying apartments in both of our name even though one pays for the EMI and claim rebate per apartment. Do you think it makes sense with respect to income tax, wealth tax or you have any better suggestion?
Mahesh Padmanabhan answers, Hi Biplab, you could take the loan in individual names and claim the deduction for the interest and principal. Yes it makes sense to be separate owners to avoid any deeming provisions of rental income or wealth tax.
reddyn asked, I am salaried person 1.75L/year and we have agriculture property in my father's name and i am getting the agriculture income of 1.5 to 2Lakhs But i can't show in returns since it is in my fathers name. Kindly adivce.
Mahesh Padmanabhan answers, It is better not to include the agricultural income in your name because in your case though agricultural income is not directly taxed, it would be used for the purpose of determing the rate of tax. ie the agriculture income of say Rs. 1.5 lakh would be added to your salary income and the rate of tax might go to the last slab of 30%.
Swati asked, Hi Mahesh, How are you? I have salary of 45K per month. i have daughter of 4 months. I want to invest some money for her future. So which schemes are available which will give me tax benefits?
Mahesh Padmanabhan answers, Hi Swati, you could invest in ELSS mutual fund schemes or insurance ULIP schemes so as to have a long term perspective of investment as also tax savings. You could put aside some portion in ELSS which would be available to you any time after 3 years for say schooling needs and insurance with longer terms for higher education / marriage needs.
srinivasan asked, I am an NRI being outside India for the last 15 years coming to India once a year for about 30 days. If I return to India in the month of May will the earnings outside India for the months of April and May including Gratuity etc recd as part of Final Settlements be taxed in India? what will be the implications of these incomes if I come under the category Resident but Ordinarily resident?
Mahesh Padmanabhan answers, Dear Mr. Srinivasan, you would not be taxed on such amounts till such time your status remains Resident but not ordinarily resident.
Dhiren asked, I think LTCG arising no sale of house is taxed @ 20 % and not 10%.
Mahesh Padmanabhan answers, You are right, error accepted, it is taxed at 20%.
rkedara asked, Sir i have one quick queston.?As of now under 80C which of the investment is more profitable as far as tax saving are concerned and also apart from 80c investment what all other investments are good for making good money?
Mahesh Padmanabhan answers, Risk and reward go hand in hand and accordingly the highest money spinner seems to be ELSS mutual funds and ULIP insurance schemes. Though these investments carry a degree of risk, they are good at generating sizable returns in the long term holding period.
PRS asked, We , myself & my husband are joint owner of a residential flat. We stay in a separate rental accommodation. Both of us are in service. We both contributed for purchasing the flat, though accounting (around 40:70 ratio ) can be done of our share, but made no official document /agreement between us of our share. Can I show in my Return under Income from House property as 40% total rent receivable & my husband can show as 70% of total rent receivable?
Mahesh Padmanabhan answers, Yes you can show the proportionate income in your personal returns.
srinivasan asked, Sir I have encashed the balances in my National Savings Scheme (NSS) account. They have deducted tax at source which is fine but also Education cess and service Tax while paying me. Considering my taxable income is below the minimum limit while claiming as refund the tax deducted can I also claim refund on Education Cess and Service Tax?
Mahesh Padmanabhan answers, yes you are eligible to claim education cess.
rajni asked, Can I show My Shares Income under the Head "Business Or profession"? Rajni.
Mahesh Padmanabhan answers, Yes you can show income from shares as business income provided you show your shares as trade assets of business.
DKShah asked, Dear Sir, my brother is in US and he has an NRI a/c. He is paying tax in US for whatever he is earning. He has sent some money to india in his NRI a/c, does he need to pay tax on Interest income? will this interest fall under 1,10,000 Limit? Thank you.
Mahesh Padmanabhan answers, I believe that your brother is Non resident in India for the current Assessmnent year in which case the interest earned on his NRE A/c is exempt u/s 10(4).
ankit asked, FBT paid on those expenses which has been capitalised, in this case, whether FBT should also be capitalised or not. Please sir, state ur reson on your opinion. I M Ankit a CA Final Student.
Mahesh Padmanabhan answers, I believe that FBT should not be capitalised. In case u capitalise FBT you would not be eligible to claim depreciation for the same. Moreover, the ICAI guidance note on accounting for FBT requires FBT to be shown in the Financial Statements in the same manner as we show Income Tax, which means that it needs to be shown as Below the Line expense.
srinivasan asked, Sir if I am resident but not ordinarily resident which is available for two years after returning to India, will the interests on the NRE/FCNR deposits be exempt for the entire period of the deposits or only for two years?
Mahesh Padmanabhan answers, Interest on NRE Account is exempt only in case of NRIs and is not exempt in your case.
srinivasan asked, sir what about service tax deducted from NSS repayment. Is this not claimable as refund?
Mahesh Padmanabhan answers, I believe there is some error in what you are terming as service tax.
avi asked, hi mahesh. Can you tell me what are the capital tax gains on overseas stock? When does it qualify to be a long-term capital gain?
Mahesh Padmanabhan answers, Short term capital gains are chargeable at your slab rate while long term capital gains would be charged at the rate of 20% of gains after indexation.
srinivasan asked, Sir, Post office has charged Service Tax while paying me my balance in NSS account.
Mahesh Padmanabhan answers, I believe this is service tax on service charges.You cannot claim deduction for the same.
DKShah asked, Thank you sir, Actually he has NRO a/c that enable him to put money in dollar and then we put money as a FD that fetches 8.5% interest as interest earned on NRE a/c is only 4.5%. Will it still be considered for exemption?
Mahesh Padmanabhan answers, Interest earned on NRO A/c is taxable.
srinivas asked, Hi I have filed my tax returns and recieved acknowledgement, however the PAN number has been miss typed by tax filing consultant ... will it be an issue as he proclaims the PAN card was referred before acknowledgement?
Mahesh Padmanabhan answers, I believe that the return would be defective and hence you would be required to file a fresh return.
Mahesh Padmanabhan says, Thanks Friends.I am signing off for the day.
Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.