If you have bought a home along with your family members as co-owners then can they avail of the tax benefit on interest paid?
Can you claim tax deduction on interest paid on your two home loans when you receive rental income from one of those properties?
In a chat with readers on January 9, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax claims on home loans, gifts, and investment in mutual funds?
For those of you who missed the chat, here is the transcript.
Part I: Paying tax on ESOPs? Check your CTC
madhav asked, Dear Sir I earn monthly 30000, I have dependent parents (father retired) and may get married next year. I woul like to invest in mutual funds and LIC for tax savings. I am unable to decide how much money i save in each of them. Could u please suggest me wht is optimum percentage amount i distribute in MF and LIC?
Mahesh Padmanabhan answers, While currently both MF & LIC incomes are tax free for the investor both have defined purpose from the perspective of planning for one's future. LIC is a necessary investment tool that ranks highest in priority as it hedges the immediate risk of loss of income to your near & dear in your absence. MF investment is a long term tool generally used for planning out long term financial needs. You would first need to assess your life coverage requirements through a financial planner or insurance expert and thereafter decide on the amount to be invested.
Narayana asked, My Company is small and not processing payroll for us, so they are not giving form 16, how can proceed with paying tax?
Mahesh Padmanabhan answers, In case you receive profesional fees or retainer fees, then your company might be deducting tax at source for which you should receive form 16A stating the deduction of tax. You could use this document to estimate your net tax payout.
Innu asked, Hi, I have already purcahsed a flat in Mumbai & is having a loan pending for amount 2.5 lakhs & this loan was taken 5 yrs back in my Name, this year i have purcahsed one more flat 2BHK in Thane in my name ony again as my wife is a House wife. 1.What is the Tax implication? 2 Can i get Tax benefit for the New flat too or is it do i have to only show Thane Flat loan amount to get more interest -Tax benefit. 3. I have given previous flat for rent which gives me good income too, so do i have to declare that too or Can i declare any one either Mumbai or Thane Flat as given on rent to save on Tax? Thanks for your Help.
Mahesh Padmanabhan answers, If you have actually given your mumbai house on rental basis and you actually receive the rent, you will not have any choice in deciding the house to be shown as rental premise. You would definitely need to declare the rental income in your returns after reducing the standard deduction and the entire loan interest. For the second house that you have occupied for self, you would be eligible to a deduction of loan interest upto Rs. 1.5 lakhs.
Innu asked, I have 1 year old child & wanted to invest for his future education/marraige. What would be the best option for this Ulip/Mutual fund or any other option? Not necessary should be Tax saving. Thanks.
Mahesh Padmanabhan answers, ULIP is a good instrument that offers the double advantage of life coverage as well as capital appreciation. But this investment should be seen with a long term horizon.
sj asked, We had bought a House with myself, father & brother as joint owner. We had taken home loan for which all three are applicants. If the interst for the year is 4.5 lakh, can each person avail tax benefit on interest of 1.5k? If principal is 3 lakh What would be tax benefit for each one?
Mahesh Padmanabhan answers, Yes if all the co-applicants are the co-owners to the flat, then each of the co-owners would be eligible for the 1.5 lakh limit separately.
nitin asked, i am a salaried employee having paid already tax of around 20K, as i haven't made any investment.. now, if i make an investment of Rs. 1 lakh, will my tax deducted be refunded to me?
Mahesh Padmanabhan answers, Yes you could make the investment and thereafter claim the deduction while filing your IT return. You would be eligible for the refund as may be applicable to your case.
sachin asked, Can i gift a car to my wife for operating as tours & travels. Will it be considered for Gift Tax? and the income from the car will be considered my wife's income? kindly suggest.
Mahesh Padmanabhan answers, The gift of car to your wife is exempt from gift tax. However, you need to note that clubbing provisions would apply on the income generated from such asset and accordingly you would be taxable for the rental income.
gsv asked, Hello sir, I am 33 years my salary 9000 pm, I have 2 daughters, one is 2 ½ years, and another baby is 8 months, right now I have no saving the money, presently I have Rs. 40000 cash (property saled amount), I am planning fixed the amount, my daughters name or my name (which is best), I invest that amount is long term, which investment is best, that money I am using my daughters future education and marriages. Kindly advice, where to go mutual funds or shares Please .suggest.
Mahesh Padmanabhan answers, You could invest the same in either your name or your childrens name. Both these investment options are tax neutral to each other. Yes in case you invest the same in term deposits, then the income from such deposits would be taxable in your hands. In case the investment is in share / mutual fund then the dividend and long term capital gains would not be taxable but the short term gains would be taxable.
esa asked, Will tax planning be the same if I work as a consultant? Thanks.
Mahesh Padmanabhan answers, Tax planning would be different for salaried individuals and retainers. Retainers would have better leeway in claiming the business expenses as deductible against their income.
SA asked, Good Afternoon Mr. Padmanabhan, I quit my regular job last year to work as a freelancer doing small jobs like data entry, webresearch etc for foreign clients (mainly USA). In short, I earn in foreign currency though it gets converted to Indian Rupees while it reaches my Bank. I request you to kindly advise :1) Which form do I need to file the Income Tax 2) What are the applicable rates/slab for money earned from foreign sources. I mean any special rule or is it as per existing Indian Income Tax? 3) Lastly, for my own knowledge where do I need to refer for detailed information in govt websites/books etc. I did try govt Income Tax website, but I could not get specific information on this. I enquired few experts in my area. However each one of them has a different theory. Some say it is totally exempted because the earning is from foreign source, some say it is flat 10% while others persist it is as same as for any others in India. I request you please please advise me on this.Thanks and Regards. Srinivas.
Mahesh Padmanabhan answers, ITR 4, is the format to be used for filing returns in your case. The rates of tax and slab remains the same as other resident Indians. As regards exemption on foreign income there certain sets of rules that might not be applicable to you as an individual professional. Hence your net income after expense would be taxable in the normal way. You could meet up with a professional to understand the tax aspects of your business clearly.
ND asked, Is dividend from MF/shares taxable? How do we show the income in returns? And how to show profit from selling share in IT returns?
Mahesh Padmanabhan answers, Dividend from MF / shares in India is not taxable in the hands of the recipient and is exempt from tax. In case of sale of share / mf, short term gains are taxable and would need to be declared under the head Income from Capital Gains.
Shiva asked, Dear Mahesh.....currently iam earning 20000/Month....i hav a life cover n LIC for 5 Lachs...and i just started 2 invest n MF elss n birla sunlife....am i doing right...or i need to do something else..i need tax benefit plus investment...and iam planning 2 invest n stocks...which way would b better for me...?
Mahesh Padmanabhan answers, Most of the ELSS MFs are good as they have a long term horison. Birla is a good fund to be invested in. Enter the stock market with due precaution. If you are just a beginner then just invest in mutual funds to get a hang of the markets.
sanjeevbhatia asked, Dear Sir, My Profit from Futures trading during april 07 to dec 07 isabout Rs.19 Lacs. I have been getting my trading a/c audited regularly. Do I have any other option to save tax other than section 80C. I have already utilised the 1 Lac limit to full. thanks.
Mahesh Padmanabhan answers, You could claim the deduction for interest if any paid for making the margin payments and other related expenses relevant for your business such as professional fees paid to auditor, accountant, STT etc.
rahulsingh asked, I am 23yrs and salary is 7,00,000 p.a. I had invested 1.2 lac in insurance policy. Now what is the amount that is taxable and how i can reduce the tax on my remaining amount of salary. I want to take home loan, what is the limit of the loan that i can take? what are the areas where i can save the tax?
Mahesh Padmanabhan answers, You could invest in the following separately, Medical insurance, house (with a loan to claim interest benefit), structure your salary well so as to include reimbursement components .
Mahesh Padmanabhan says, The session was very good and i thank you all for participating in this session.
Part I: Paying tax on ESOPs? Check your CTC
Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.