Is there a way your employer can help you in saving tax on fringe benefits that you get? If yes, then how can you go about it?
How can you save tax using house rent allowance, interest and principal paid on your home loan and letting out property that you own?
In a chat with readers on April 23, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax claims on home loans, HRA benefits, capital gains tax and how to plan and invest your money in 2008-09?
For those of you who missed the chat, here is the transcript.
DK asked, can i take advantage on Home loan as well as Rent
Mahesh Padmanabhan answers, You can take the benefit of HRA as well as home loan if you are actually staying in a rented premises. However, you would need to note that if your owned house is in the same city then you need to have strong reason to be staying in a rented premises. Employment requirement is one such reason. If your stay in a rented premise is merely to meet your convenience then such reason would not hold good.
pramod sahoo asked, Sir, i m a central govt employee. This year my salary will be around 5.5 lakh. How can i be able to save tax besides the maximum limit of 1 lakh savings. Can I gift some amount to any relatives and get benefited from it. I want to make part payment of my home loan, is it the right decision taking into account i m in the 20% income tax bracket.
Mahesh Padmanabhan answers, Gifting does not entitle the donor to any tax deduction. In case you you have your section 80C investment quota of Rs. 1 Lakh covered then you may not be specifically be eligible to any additional deduction for the part payment of home loan. But considering the rising interest rates, it make sense financially to pre-pay atleast some portion of your loan.
ak asked, There is a article on Rediff to pay Zero Tax on Rs. 13.10 Lac income by creating an HUF. Can you please provide some details on this and if this is really workable option for salaried class?
Mahesh Padmanabhan answers, HUF can be created by any hindu family. It works as a separate taxable entity and hence if you are in the maximum tax bracket then it might make sense to push some income into the HUF. Having said this you need to note that it is not as easy as it is made out. The principal contribution has to be managed well as it might otherwise be clubbed with your own income. You would need a detailed counseling session with your tax consultant before you go about creating a HUF.
sanjeev asked, I WORKING IN JAIPUR, i am staying with my parent alonr AND MY FAMILY STAYING IN Mumbai in the house taken by me on Rent, i am paying rent of Rs 10000 pm by cheque and agreement is there. can i take benefit of HRA exemption for this house?
Mahesh Padmanabhan answers, Though your question is unclear, based on my understanding, i am answering the query. In case you are staying in your parent's house in Jaipur and paying rent to your father then such payment qualifies for HRA deduction. However, if you are referring to the rented house in Mumbai for your family while you are staying in Jaipur on account of your employment then you would not be eligible for any deduction for the Mumbai rented house.
Samrat asked, Hi there ... I have 50K that I got as bonus and can invest right now. I am not too adventurous and would like to invest in a safe plan even though the returns are not very high. Lock in pd max of 5 year, what plan shud be best for me and how much return do I expect?
Mahesh Padmanabhan answers, In case you are risk averse, then you should either go for term deposits with banks or in MF FMPs. However, as your investment horizon is 5 years, you could also look at diversified equity MFs.
KKA asked, Hello Mahesh, Good Afternoon!! I am currently residing in a rented house and am now planning to buy a flat. I would not be moving into the new flat that i'm buying and would be renting it out. I wanted to know if i can claim tax excemption on home loan for the new flat plus claim HRA for the current residing house.
Mahesh Padmanabhan answers, If you are actually renting out the new house then you would be eligible to claim the entire amount of home loan interest as deduction in addition to the standard deduction of 30%. Moreover, if you are actually staying in a rented house then you could claim HRA deduction also.
PKK asked, WHILE SUBMITTING ITR2, PLEASE CLARIFY THAT SHOULD WE FILL UP THE INTEREST RECEIVED IN PPF ACCOUNT IN "SCHEDULE EI" ?
Mahesh Padmanabhan answers, The interest credited for the year as mentioned in your PPF passbook would need to be mentioned here. Please note that this is exempt from tax and appears only as a disclosure.
Gopi asked, Hello Mahesh,I would like to purchase a land for constructing a house.Could you please tell me whether can I get tax saving either in purchase or in construction or both
Mahesh Padmanabhan answers, You would get the home loan benefit for the construction of the house. But in case of interest on loan for purchase of land you would not get any deduction.
u asked, hello my income is 144000yearhow i t6ax save?
Mahesh Padmanabhan answers, Your income is below the taxable limit and hence you do not need to save from the perspective of reducing tax. However, from the perspective of general investing you could opt for any of the available investment options such as PPF, NSC, Term deposits, Mutual Funds etc.
avinash asked, hello sie i want the information about different types of funds or schemes useful for tax saving plz reply me?
Mahesh Padmanabhan answers, Tax saving MFs are more popularly known as Equity Linked Savings Scheme (ELSS) MFs. You would need to check for a fund which is eleigible for such tax deduction. eg. of such funds are SBI Magnum Taxgain Fund, HDFC Tax Saver Fund, Birla Sunlife Tax relief Fund.
SUNIL asked, I AM A SALARIED PERSON. I'VE JUST BOOKED A FLAT WHICH IS UNDER CONSTRUCTION AND I'VE TAKEN A HOUSING LOAN OF RS. 27,50,000/-. I WILL GET POSSESSION OF THE IN JANUARY, 2010. PRESENTLY I AM STAYING IN A RENTED FLAT. CAN I GET INCOME TAX REBATE ON BOTH RENT AND EMI AND INTEREST OF HOUSING LOAN.
Mahesh Padmanabhan answers, As you are staying in a rented premise, you can claim the benefit of HRA deduction but in case of the property that you have purchased, as the same is under construction you can claim the home loan benefit only after the construction is completed.
sameer asked, I want to purchase a commercial property by taking loan from my relative. I am also planning to pay my relative an interest . Will this interest paid qualify for tax deduction under interest on housing loan section?
Mahesh Padmanabhan answers, You would get the benefit of such interest paid to your relative. However, to be very clear, you would be advised to have strong documentation. Which means that you would need to execute an agreement for the loan with the terms of repayment and interest clearly mentioned therein.
krnmeena asked, i m goverment sarvant. My income sources are sahre trading, salary, and mutual fund divident. in finacial year, my short term gain is negative in share trading if my total income (1).from salary:160000 (2).from share:-5000 (3).divident:1000. (4).Interast:300. (5). my saving is 18000 under 80c. than what is my total taxable income? what ITR from i should fill for tax return. thanks.
Mahesh Padmanabhan answers, In case these details pertain to financial year 2007-08 then as your taxable income is in excess of Rs. 1.1 lakhs, you would be needed to file your returns in ITR-2. In case this is for the FY 2008-09, then as your taxable income is below the taxable income of Rs. 1.5 lakhs, you would not be needed to file your returns.
Prasad_js asked, Hello Sir, This is JS Prasad working in Mumbai. I am getting CTC of 10 lacs (I ma new to Mumbai - so I am not sure where to buy property to save tax on Home loans). Want to know details on Investments. Also I need to know about the tax advantages under section 80 G as I am planning to donate some money to a organisation which is recognized. Thanks.
Mahesh Padmanabhan answers, Though you would get tax breaks for investing in home using a loan, you would need to note that the current property rates are actually overvalued and might come down in the coming few months. Hence it would be wise not to go in for such investment option as of now. In case of deduction on account of donations, you would need to note that only some specified donations qualify for 100% deduction but for most it would be 50% of the amount donated. In some cases there is a restriction of such deduction to the extent of 10% of adjusted gross total income.
Ajay asked, Good Afternoon Mahesh, Hope you are doing Great!!! What is the maximum amount per annum non-taxable for LEAVE TRAVEL ASSISTANCE and MEDCIAL ALLOWANCE?
Mahesh Padmanabhan answers, There is no specific tax limitation for LTA apart from the frequency restriction of once in 2 years or twice in a block of 3 years. This would however, be subject to the salary structure defined by your employer. In case of deduction of reimbursement of medical expenses the limitation is Rs. 15,000 per annum.
ansar asked, Hollo Sir Pls define fringe benifit tax andt tax burden in the hands of employee.
Mahesh Padmanabhan answers, FBT (excepting on ESOPs) is theoretically the liability of the employer. However, in many cases the employer incorporates FBT liable expense reimbursement component into the salary structure of employees to facilitate lower tax to the employee. In such case, the employer might mark this amount as a cost and include it into the CTC of the employee.
agpandey asked, sir is there any benefit in purchasing agricultural land from tax point of view
Mahesh Padmanabhan answers, Agricultural income per se is not taxable. Otherwise there is no specific deduction available for purchase of agricultural land.
Brijesh asked, Hi, What is the procedure for filing e-returns?
Mahesh Padmanabhan answers, You could visit the income tax site www.incometaxindiaefiling.gov.in and download the excel utility files for completion and then uploading.
Rajesh asked, What would be the upper limit for considering the Interest Amount on Housing Loan when House is Let out?
Mahesh Padmanabhan answers, There is no upper limit for deduction of housing loan interest when the property is let out.
nd asked, sir, can the loss against one share be settled against the profit of another while calculating short term capital gain?
Mahesh Padmanabhan answers, Yes it can be adjusted against the profit on sale of other shares.
Mahesh Padmanabhan says, Dear friends, it is time for us to sign off. We thank you for your participation and hope to back to answer more queries next time. Team RelaxwithTax
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