Can you claim tax benefits on rent paid even when you do not have housing rent allowance, HRA, as your salary'c omponent?
Do you know what will be the exact amount of tax exemption you will get, if at all and under which section?
Also, what are the implications for you and your company if you submit false documents for claiming HRA, medical benefits and leave travel allowance?
In a chat with readers on March 12, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax claims on HRA, home loans and capital gains tax?
For those of you who missed the chat, here is the transcript.
Mike asked, If i take a loan for renewation of my house which is in my Dad's name, then can i get tax benefit n it? Plz advice.
Mahesh Padmanabhan answers, If the house is not in your name, then definitely you would not be eligible to avail of any benefits of loan repayment.
Padma asked, Hi Mahesh.I am 27 years, married, no kids. I had planned to invest 2000rs in SIP MFs from this year April. I have a holding of Rs.1 lakh from previous occasional one-time investments in ELSS. But after seeing the market going down steeply and my previous investments at loss, I have lost the hope on MFs and decided to drop the idea of putting some money into it. What is your take on my decision? Can I opt for some other saving avenues other than FDs & MFs for better returns?
Mahesh Padmanabhan answers, We have always advised that only such investors who are disciplined in terms of regular investing and have a long term investment horizon would benefit from the equity investments. As you have used the SIP route, at least your average cost might be lower and it is just a question of holding on to the investment for a longer time horizon. MFs may not be suitable if you require the funds in a short term time frame and you would be better off in terms of investing in safe debt instruments such as Time deposits with bank or post office. In case you want to invest a bulk amount in MF then you could use Systematic Transfer Plan (STP) route where your bulk amount is invested in debt funds and is systematically transferred to equity MF. This method essentially symbolises the SIP investment mode and again helps in reducing the overall risk of price fluctuations.
neetu asked, Mahesh, nowadays each n every financial planner is advising his clients against insurance i.e money back/ ulip insurance, n telling them to go for term insurance only for life cover, how much of this u think is true? i mean instead of insurance they r advising to invest in MF or equities, do u think in the long run, i.e if 1 is planning for retirement solutions this is advisable?
Mahesh Padmanabhan answers, It is incorrect to state that insurance should be used only for covering the life risk, it is also an age old tool for retirement planning. The context here is the relativity of needs i.e. individuals a generation back were happy with providing for certain basic needs and the cost of living was also low; this scenario has changed a lot with the current generation. The expectations in terms of lifestyle, life span, healthcare costs have all gone up substantially and people desire to provide more for their future. With this increase in expectation people have become bolder in terms of risk taking abilities i.e. they are willing to invest in the equity investments through mutual funds or direct investment in shares.
With this background it is pertinent to note that ULIP essentially brings together the need to cover the life risk and fund investing and accordingly this option would be open to the risk of market fluctuations and a higher overall cost to the investor. Whereas, committed / endowment insurance plans might generate risk free but probably lower returns. Term insurance on the other hand is suitable to bridge the gap in covering life risk with low cost premium policies. A variation of the term policy is that the premium amount is paid back on completion of the term such as the Dream Plan from Birla Sunlife Insurance.
atul asked, sir i have two proprietory firms for two balance sheet are prepared along with p & l and other schedule and than i have club income in personal balance sheet. i have querry how to file ITR 4 i.e specially p & l and balance sheet. means which balance sheet figh\ure should i insert and how to fill p & l figure atul pathak 9322265053.
Mahesh Padmanabhan answers, As you are running sole proprietary business, the income for both your business would need to be consolidated and mentioned in the ITR.
neetu asked, Hi Mahesh, just wanted to know that if i keep my mutual funds invested for more than a yr then i am not eligible for Capital gains tax? is it rite? & also if i keep my SIP discontinued after 2 yrs & dont withdraw the money the accumulated money still remains invested until n unless i dont withdraw it? this is wat my financial advisor has told me? kindly guide me.
Mahesh Padmanabhan answers, Yes in case you have held the MF in excess of 12 months and if it is covered by STT then the same is exempt from capital gains tax. Also, discontinuance of SIP after two years is no cause of concern and the taxability would be applicable only on sale / redemption of such ELSS MF.
SHARMILA SAMANTA SARKAR asked, Hi! I need to invest Rs. 40k this month. Please advice which ELSS WOULD BE THE BEST ONE. I have minimal risk appetite. PRINCIPAL TAX SAVER DSP ML TAX SAVER SBI MAGNUM TAX GAIN Please advice can I invest in all the above 3 funds in SIP. Regards,Sharmila.
Mahesh Padmanabhan answers, Generally all tax funds are reasonably stable as the time frame of investing is higher. You cannot however avoid the market fluctuation risk in terms of MF investment and accordingly if you wish to invest in risk free investments, then investments such as PPF would be a good tax free and assured returns option.
pranay asked, Hi Mahesh, is it true that if we dont get HRA in ur salary slip, u can claim rent under 80gg section by filling in the 10BA form? if it is so how much is the max claim i can make?
Mahesh Padmanabhan answers, Section 80GG is available to self employed individuals and salaried individuals who do not have HRA as a component of their salary. Other conditions are that such individuals should not own a house and if he/she has a house at some other place, then he/she should not claim benefit of Self Occupied House. Such individuals should also file a declaration in Form 10BA regarding the expenditure incurred towards rent.
The maximum amount of benefit that can be claimed under section 80GG is the least of the following: 1. Rs. 2,000 per month 2. 25% of total income 3. Excess of rent paid over 10% of total income
arun ji asked, What is limit for elss investment and which securities covered under the same?
Mahesh Padmanabhan answers, Investment in ELSS MF can be done anytime through the year before the end of the financial year ends. However, as the investment is in equity oriented investment it is advisable for you to use the SIP mode so that your risk is minimised. Each fund house specifies the fund that is covered under the ELSS plan.
Ravi asked, Dear Mahesh, I am working in an organisation as Finance head. In my organisation most of the people submitting forged rent receipt, medical bills & LTA bills. I would like to know, If I accept this, I have financial liability on this amount. Thank you.
Mahesh Padmanabhan answers, The fact that the employer is giving credit to employees for certain eligible investments / expenses means that they are supposed to be checking the source documents to confirm if the documentation is right. In this context it would be pertinent to note that the deduction for donation (other than specified payments) are not allowed to be considered by the employer and reason for this is the scale of bogus charitable institutions floating around. Definitely, your company would be in trouble if acceptance of bogus documents are accepted.
shyamlal asked, I have 30% slab taxable income from Interest earning where as my wife has an income of about Rs. 40000.00 per annum but she is also an assesse. How can I save on tax?
Mahesh Padmanabhan answers, In case you are thinking of making the investment in your wife's name to avoid taxation, please note that clubbing provisions would apply and the interest income would again get clubbed in your name. Other options are to create the wealth base for your wife by way of gift, income etc and then do the investment from her account.
kan asked, If inherited property is sold then long term capital gains to be paid without taking into account indexation is how much? my CA says it is taxable? Can u tell me under which section of IT ACT?
Mahesh Padmanabhan answers, Long term capital gains is taxable at a flat rate of 20% (+Surcharge, Edu Cess). This is covered under section 112 of the Income Tax Act. However, you can explore the possibility of saving on tax by making use of the reinvestment in eligible investments to avoid tax.
enil2008 asked, I have a brother who is studying in Engg. I am spening 40 thousand / year for his tution fees. I am the only earning peron in family. Is there any way I can show and get tax exemption on his tuition fees?
Mahesh Padmanabhan answers, You can claim the deduction for the tuition fees under section 80C up to a maximum of Rs. 1 Lakh.
anuragmanocha asked, Can we gift some amount to my parents which are retire, do i have to pay any tax on that, or it will deducted from my income? What is tax liabilty on them?
Mahesh Padmanabhan answers, Gift to relative is not liable to be taxed in the hands of donee. Parents are covered for the definition of relative.
rajmathur asked, i have bought a property in my daughthers name, 2 daugthers, and as a guradian i have signed it, then in terms of IT and law who is the owner of the property, please reply?
Mahesh Padmanabhan answers, In case your daughters are major and if the property is registered in their names then they would be the official owners of the property. In case you have paid for the same then it could be treated as loan to your daughters.
Vishal asked, I have bought a house in Nov 2007 and took loan from HDFC, i have paid the following amount to HDFC : PRINCIPAL COMPONENT Rs. 12,663.00 INTEREST COMPONENT Rs. 47,825.00 Pre-EMI Interest : Rs. 33,051.00 This Pre-EMI was paid for Dec 2007 and Jan 2008, i have taken the possession of house in March 2008. My question is can i claim the entire INTEREST COMPONENT and Pre-EMI Interest in this Financial year or it needs to be 1/5th under section 24 Since i am unable to understand the ACT, i would be thankful if you can explain me the same with my situation.
Mahesh Padmanabhan answers, In your case as the house is completed, you would be eligible to avail of the home loan benefits. The entire principal component could be claimed as deduction under section 80C and in terms of interest deduction under section 24, you would be eligible to a deduction of the entire interest component and pre-emi interest as the same has been paid in the current year.
lodha asked, UNDER REVERSE MORTAGE CAN CHILDREN REPAY THE AMT PD BY BANK AND RELINQUISH THE CHARGE ON HOUSE?
Mahesh Padmanabhan answers, Yes children can repay the loan and interest and get the asset released of the lien. This however, is subject to the succession laws applicable.
sumant asked, Hello Mahesh , I have purchased a house in pune and getting the benefit on it, but neither i m living in my own house nor i have any income from it. I m living in a rented flat in pune near my office. Can i get the benefit of this? if yes under what clause? pl guide.
Mahesh Padmanabhan answers, Yes you may avail of the HRA benefit for the rental place and also avail of the loan repayment benefit where the individual is staying in a rented premise for the purpose of employment.
madan asked, Dear padmanabhan, Can you please clarify on the STCG of house property ie. If I sell a house property which purchased only two years back and invest the sale proceeds including the STCG in another property how the STCG will be accounted and taxed?
Mahesh Padmanabhan answers, In terms of exemption from capital gain tax, most of the reinvestment options are only for long term capital gains and hence in your case though you might be reinvesting in another property, you would be subject to STCG tax.
Raju asked, I am renting a house from my father, How to calculate/decide rent?
Mahesh Padmanabhan answers, You would need to look at the fair market rental for premises in your loacality and form this as the benchmark. You could speak with brokers to find the rental value.
Rishi asked, Hi, can my wife take 2lakh gift frim her younger sister?
Mahesh Padmanabhan answers, Yes she can take the gift without any tax implication on such amount.
Mahesh Padmanabhan says, Thank you friends for participating in this session, we would now sign off and be back later. Team RelaxwithTax
Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.