Please refer to the discussion going on in the Discussion Forum at the following URL:


http://www.raagvamdatt.com/module-pnForum-viewtopic-topic-8.html

Please refer to the discussion going on in the Discussion Forum at the following URL:


http://www.raagvamdatt.com/module-pnForum-viewtopic-topic-8.html

Hi Good Friend,

1. The deduction of housing loan principal amount repayment is not allowed for a house under construction.

It is only allowed from the financial year in which the construction of the house is completed. Thus, if you have been repaying principal for the entire year, and the construction gets over in March (or any previous month), then you can claim deduction for the full principal amount paid. But if the construction gets completed in April, then, you cannot claim deduction of the principal amount that you have repaid.

For this reason, most banks do not fully disburse the loan before the construction of the house is completed. They release a partial amount, and you pay a pre-EMI interest on it. This interest can be claimed for deduction in 5 equal parts for the following 5 years.

If you have paid the stamp duty and registration during the year in which the construction gets over, even that can be claimed for deduction for that year.

2. The answer to this depends on which NSS scheme you have invested in. The tax treatment for National Savings Scheme (NSS) 1987 and NSS 1992 is different.

For NSS 1987 (which was closed with effect from April 1, 1992, and a new scheme was launched), the entire contribution was deductible from taxable income. Here, the entire amount - both principal and interest – are taxable on withdrawal.

For National Savings Scheme 1992, the contribution was deductible subject to the ceiling under Sec. 80C. Here, only the interest income is taxable. The principal is not taxable on withdrawal.

Even for interest, you have two options: You can show the interest on accrual basis (that is, show each years interest as an income for that year, and pay income tax on it every year). Or, if you haven't done so, you pay income tax on the interest earned in the year of withdrawal.

Under section 80C, whatever you invest gets deducted from you taxable income, and you do not pay tax on it.

For having a Rs. 5,120 tax liability at 10%, Rs. 51,200 of your income would be taxable.

Thus, to make your tax liability Zero, you would need to invest Rs. 51,200 in instruments qualified u/s 80C.

You can read more on section 80C at: Saving Income Tax – Understanding Section 80C Deductions


(I hope you are asking this question for the next year, as for the last financial year, you can not have a tax liability of Rs. 5,120 being in 10% slab)

Hi,

Your employer has issued form 16, which is for the salary earned by you.

The Form 16A that you have received is for the TDS on your professional income (income from consultations, which is not a fixed salary).

Since you have income from profession apart from income from salary, you should fill ITR3.

Here's how you should calculate tax on this:

Take you gross rental income (Rs. 12 Lakhs), and deduct the municipal taxes you have paid from this.

From this, deduct 30%: This is a flat deduction allowed as a provision repairs and mainteance.

If you have teken the property on loan, deduct the interest paid from the result. There is no upper limit on this.

This is your final taxable rental income from the property.

Calculate income tax on it depending on the prevailing income tax slabs / brackets - you can find this information in the article "Budget 2008 – Impact of Income Tax Slab / Bracket Changes on You".

Example:

Say you have paid municipal taxes of Rs. 1 lakh (hypothetical)

Step 1:

Rs. 12 Lakhs - Rs. 1 Lakh = Rs. 11 Lakhs.

Step 2:

30% of this = Rs. 3.3 Lakhs.

Balance = Rs. 11 Lakhs - Rs. 3.3 Lakhs = Rs. 7.7 Lakhs.

Step 3:

No loan taken, so no change to this amount. We still have Rs. 7.7 Lakhs.

Now, calculate income tax on this depending on the slabs given in "Budget 2008 – Impact of Income Tax Slab / Bracket Changes on You".

Hi,

An amount given to your sister as a gift would not be deducted from your father's income for income tax purposes. He would need to pay income tax even on that amount.

The amount given to your sister would be exempt from gift tax, meaning that there would not be any extra gift tax.

But there would be no income tax benefit due to the gift.

An investment in eligible instruments under section 80C before March 31st make that amount deductible from the income for that year, and therefore result in reducing the income tax burdon.

You can read more about saving income tax using section 80C investments in "Saving Income Tax – Understanding Section 80C Deductions" at http://www.raagvamdatt.com/Article123.html.

Dear Roli,

When PF and Gratuity amount is received by the legal heir of a deceased person, the entire amount is tax exempt. Therefore, you would not have to pay any tax on it.

Hi Anupam,

The income tac benefit for the pre-EMI interest paid can be claimed only after receiving the possession of the flat. You can start claiming it starting the year in which you get the possession. This interest can be claimed for deduction in 5 equal parts for the following 5 years.

As such, there is no upper limit on the pre-EMI interest that can be claimed. But since this is to be included with the "interest paid on borrowed capital" under the head "income from house property", the upper limit of Rs. 1,50,000 per year applies.

That is, if the interest component of your EMI for the year plus 20% of the pre EMI interest paid is over Rs. 1.5 Lakhs, the amount over and above Rs. 1.5 Lakhs can not be claimed as deduction.