Answer:
The querist has not indicated the place where he intends acquiring the new house. However the manner he has expressed his ambition, it is deduced that his proposal is to acquire a residence is, at his place of duty. In such a situation, Mr. Ramprasad is entitled to the following benefits:
- If he resides in the new house, that he proposes to acquire, for his personal occupation, no value attribuable to the rent would be considered, as income under section 23(2)(a) of the income-tax act. Conversely, if he is drafted on assignment to any other station by virtue of which he is unable to occupy he same, but keeps his house vacant, then also, no notional income would be considered in his income-tax assessment.this is because he does not derive any benefit by way of rental income from the property.
- The interest element arising out of the borrowed loan would be allowed as a deduction under section 24(b) to the exent of rs.1,50,000, for each year until it is liquidated.
- This apart, he is also entitled to deduction under section 80c of the act, on the extent of repayment of principal relating to each year (until repayment of the principal is completed) specifically provided under section 80c(2)(xviii)©
The own ancestral house, at vizag., it is presumed belongs to the join family which would not deter the individual benefits, enuring to the querist.
Question 2: We have inherited an estate from our grand parents. The legacy also has laid down that our succession to the bequest is subject to our donating certain specific items of centuries old jewellery inherited by different generations, now descended to us, to a prominent temple of importance and worship. These jewellery are beyond description as to their exact identity such as necklace, chain etc. they only carry sentimental and antique value, they are sizable in number and must be very valuable in terms of present market worthiness. We were advised by a few friends that we can get the benefit of deduction under section 80g of the act. Kindly advise us of the possibility of any such benefit enuring to us.
Answer: The querist is advised that he can donate the jewellery in question to any temple of the choice specified in the legacy. ( under normal circumstances donation to any temple of national importance for repairs or renovation entitles a person to the benefit of deduction under section 80g(2)(vii)(b) of the income-tax act. At the same time, he is, cautioned / advised, that he would not be entitled to any benefit by way of deduction under section 80g of the income-tax act. This is because explanation 5 to section 80g clearly states that “ no deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money”
Question 3: 1. My sons reside in the USA and have been regularly making remittance to me. I am cautioned by one of my elderly, close friends that one fine morning, I could be nabbed for non payment of income tax and may be hauled up with penalty etc., please advice me the mode by which the department could know of such overseas transactions and what is the extent of tax obligation cast on me. Incidentally i am senior citizen running 74 years of age.
Answer: The lurking anguish and agony of the senior citizen is misplaced and apparently self made. The querist has not indicated the nature and character of remittance. In such a situation, it is naturally taken that the remittances by his children from abroad are in keeping with the filial obligation to their parents. Such remittances are naturally from out of income earned by them abroad, which would have suffered inherent taxation in the foreign soil. Conversely, if the receipts are independently taxed in India, by virtue of deemed accrual in India, then again it is only the sons of the senior citizen who are accountable for the tax liability. (explanation 2 to section 5 of the income-tax act) it is presumed that the senior citizen does not act as an agent of his son, but merely gets some funds from his sons.
The querist would not suffer any burden of tax liability with regard to the remittances he receives from his sons abroad.
As regards his curiosity as to the mode and manner by which the income-tax department could garner information about such remittances, he is conveyed that section 285ba of the income-tax act imposes an obligation on entities who:
- Register purchase/sale/allotment of shares in any joint stock companies, where the value exceeds Rs.1 lakh.
- Deposits in banks where it exceeds 10 lakhs during a financial year
- Where the value of any property (immovable property) registered exceeds Rs.30 lakhs or more.
to furnish an annual information return before the commissioner of income-tax, central information branch of each state. This information would be processed by the department for verification and appropriate action depending upon the need in each case.
Question 4: I own a factory engaged in manufacturing aluminium castings and bearings. During the course of my business I make different payments to various concerns for their services, contract, job work etc., I also pay salary to my managers. While I am a proprietor being an individual, I am advised there is no obligation to deduct at source on payments I make to enterprises connected with my business, please advise whether the suggestion is correct and if not to what extent obligation is cast on me.
Answer: The querist is advised that the obligation to deduct tax from out of salary payment made to his managers are mandatory when once the payment exceeds the taxable minimum. Similarly on other payments also it is mandatory. As regards interest payments, if any, made by him, he is advised that if his turn over exceeds Rs. 40 lakhs he is bound to furnish a tax audit report as laid down under section 44ab of the income-tax act, then irrespective of his personal status, such as individual, huf etc., he is bound by the obligation to deduct tax under the relevant provisions on other payments also, subject to the basic limits provided therefor. Failure to deduct tax would entail in charging of interest under section 201(1a) besides penalty under section 271c of the income-tax act.
Question 5: My brother had sold his share of our ancestral property for a consideration of about 6.89 lakhs. This was also the value quoted in the sale deed executed by him. During the course of his tax assessment, he has been conveyed by his assessing officer that since the value of the property has been understated (even though the buyers have paid higher stamp duty on the basis of guideline value) he is going to substitute the actual guideline value to determine the capital gains. Actually my brother has received only the value declared in the sale deed and nothing more. What are the powers of the tax authorities in this line? Please advise.
Answer: The querist’s apprehension is well founded. When the assessing officer finds that in respect of a property which has been subjected to stamp duty on a value more than what is stated in the sale deed, he is entitled to substitute the value for which the registering authority has collected the stamp duty. In other words, if the guideline value for a specific property is more than the value furnished in the document, the assessing officer shall substitute the guideline value and hold it as the sale consideration, even though it may be notional. This is by virtue of section 50c of the income-tax act. He has to pay capital gains tax on the substituted value (deemed as sale consideration)
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