Friday, July 20, 2012

“INTEREST PERTAINING TO PERIOD PRIOR TO POSSESSION/ CONSTRUCTION OF THE HOUSE PROPERTY”


TAX TALK-23.07.2012-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“INTEREST PERTAINING TO PERIOD PRIOR TO POSSESSION/ CONSTRUCTION OF THE HOUSE PROPERTY”
Query 1]
Sir, The following is the case:
Loan is taken for construction of independent House. Construction Started in April-2010. Construction is expected to be completed by August 2012. Full EMI have started immediately with effect from May 2010 for full Sanctioned Loan (irrespective of stage-wise disbursement).
1.      Whether we can claim deduction for Interest accrued during 2011-12 in Income from House Property, irrespective of Completion / Possession of House?
2.      Precisely, we seek your clarification as to whether the date of completion, or the date of occupation or the date of commencement of Loan repayment will be the deciding factor for computation of allowance of accrued Interest on House Property under the head Income from House Property, while computing the taxable income? Early clarification is solicited. [N. Subramaniam-sans592000@yahoo.co.in]
Opinion:
Interest in respect of pre-construction is deductible in five equal annual installments commencing from the previous year in which the house is constructed/acquired. For this purpose “pre-construction period” means the period commencing on the date of borrowing & ending on the March 31st immediately prior to the date of completion of construction /acquisition.
If the house is completed in any particular year then one should note that the pre-construction interest doesn’t include the interest for the period from 1st April of that year to the date of completion in that year.
With above basic idea,
1.      In the given specific case, deduction towards interest is not available during the FY 2011-12 (& also in FY 2010-11) as the construction of the house is not completed before 31st March 2012.
  1. The deduction u/s 24(b) towards interest on housing loan availed for construction of house property is available from the year in which construction of the house property is completed.
  2. Interest pertaining to FY 2011-12 & 2010-11 can be claimed as deduction in 5 equal installments commencing from the FY 2012-13 to FY 2016-17.
  3. Interest for the period from April-2012 to August-2012 would not be considered as Pre-construction period interest & the deduction for the same would be available in the FY 2012-13 itself.

Query 2]
Sir, please provide Income Tax Notification details, whether Tax deduction at Source (TDS) is applicable on the Service Tax reimbursed to Contractors/ Professional consultants etc? Please enlighten. [tscbose@sunflagsteel.com]
Opinion:
  1. Section 194J deals with Tax Deduction provision in respect of Fees for Professional / technical services & Section 194C deals with Tax Deduction provision in respect of payment to contractors & subcontractors. Similarly, Section 194-I provides for deduction of Tax at Source in respect of Rent Payment.
  2. Circular No. 4/2008 Dated 28.04.2008 issued by Central Board of Direct Taxes (CBDT) specifically provide for exclusion of Service Tax in respect of Rent Payment U/s 194-I from TDS provision.
  3. As far as payment towards fees for professional or technical service u/s 194-J is concerned, it may be noted that CBDT has issued a circular F. No. 275/73/2007/IT (B) Dated 30.06.2008 to specifically provide for Deduction of Tax at Source from all the payment (including service tax) towards fees for professional charges. Applying the same logic of interpretation, we are of the considered opinion that TDS is to be done on all the payment/credit (including service tax) done u/s 194C.

Query 3]
Sir, I have made a donation of Rs. 1,00,000/- towards rehabilitation center for handicapped run by Shri Gajanan Maharaj Sansthan during the F.Y. 2011-2012. Can I claim the full amount as deduction while filing return now? I will be thankful for your guidance. [shailapoflee@yahoo.co.in]
Opinion:
1.      Section 80G provides for a deduction in respect of donations to certain funds, charitable institutions etc subject to the conditions that such funds/ institutions are approved u/s 80G(5)(vi) of the I.T. Act, 1961. If the receipt of Donation of Rs. 1 Lacs reveals the fact of approval of the said trust U/s 80G(5)(vi), then you can claim deduction @ 50% of the Donation u/s 80G of the Income Tax Act-1961.
2.      The full amount is not eligible for deduction from Income. The deduction admissible is @ 100% or 50% of the donation amount depending upon the fund/ institutions to whom the donation is done. The total deduction u/s 80G is restricted to a maximum of 10% of the adjusted gross total income.

Sunday, July 15, 2012

“TDS NOT REFLECTED IN 26AS”


TAX TALK-16.07.2012-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“TDS NOT REFLECTED IN 26AS”
Query 1]
TDS of Rs. 5,400/- is deducted by a branch of State Bank of India on 26/12/2011, from certain amount payable to me on account of salary arrears. But the same amount is not reflected in Form No. 26AS. A lot of correspondence with the branch and their controllers has taken place but the matter is still not resolved. At last on 30/06/2012, the bank issued me a Form No. 16. In which Acknowledgement No. 029560200081661 is incorporated. However, this amount is yet not reflected in Form No. 26AS. Upon making queries with the deducting Authority, they have given an evasive answer that it does not matter & I may file the return manually. In the circumstances, I am unable to file my Income Tax Return online.
I request you to advise me:
1.      From whom I can verify the data uploaded against Acknowledgement Number- 029560200081661?
2.      To whom, I may address my complaint with Income Tax Department?
3.      Whether I may file Income Tax Return online by just quoting the acknowledgement number provided by the branch? [rvjagdale_wcdr@bsnl.in]
Opinion:
1.      The data uploaded against any Acknowledgment number can be viewed by the person with the help of Tax Deduction Account Number (TAN) & Acknowledgment Number of the e-TDS return filed. For this, you have to login at https://www.tin-nsdl.com/ where in the center of the screen, one can click at below PAN, TAN at “e-TDS/TCS filing” option so as to view the “Quarterly Statement Status”. In the Quarterly Statement Status, any one can view the required details by entering TAN &15 digit numeric acknowledgment numbers. The amount, as mentioned by you in the query, may not have been reflected in your 26AS due to wrong quoting of PAN or mismatch in the Challans entered by the Deductor while filing TDS return.
2.      In your case, prima-facie it appears that the bank has made the payment of TDS & has also filed the TDS returns, with either your wrong PAN or mismatch in the data of Challans paid as a result of which the amount is not getting reflected in your 26AS. Filing the complaint may not conveniently serve the required purpose in your case. You can file the income tax return by just quoting the acknowledgment number of the TDS return. In normal course, the tax credit is abruptly not granted unless & until the same is reflected in 26AS of the assessee. However, the Assessing Officer in such cases can grant the tax credit after verifying the genuiness of the claim. You may intimate all the facts & figures to your Assessing Officer & after verification, you will surely get the due credit of the TDS amount.
Query 2]
In FY 2011-12, I have STCG of Rs. 14,000/- (Profit) & LTCG of Rs. (33,500/-) (Loss) from share market. I am a salaried person in 30% slab of Income Tax. Whether I should pay IT on profit or it will be clubbed with loss? Which form should I submit for IT return? Please clarify. [kshirish1968@rediffmail.com]
Opinion:
1.      As Income by way of Long Term Capital Gain (LTCG) from share market transactions is exempt from tax, the loss therefrom is not eligible for set off against any other income. So, Long Term Capital Loss of Rs. 33,500/- as mentioned in the query cannot be set off against STCG of Rs. 14,000/-.
2.      The Short Term Capital Gain (STCG) from share market transactions of Rs. 14,000/- is taxable at a special rate of 15% u/s 111A of the Income Tax Act-1961.
3.      Since you are a salaried assessee having no income under the head “Income from Business/ profession” & but having “Income from Capital Gain”, you can file the income tax return using ITR-2.

Query 3]
An assessee deducted TDS of Rs. 2 Lacs. He deposited Rs. 2 Lacs CASH in Mr. X's saving A/c who used his internet banking to make the payment on the Assessee's behalf on the same day. Does this transaction contravene any IT provision? The assessee is under Tax Audit. [itr_ngp@rediffmail.com]
Opinion:
Mr. X is acting as an agent on behalf of the principal only, with or without any monetary benefit. In my view, there isn’t any contravention of any of the provision of the income tax Act.


Sunday, July 8, 2012

“THE YEAR OF ACQUISITION WHEN PROPERTY RECEIVED UNDER WILL IS SOLD?”


TAX TALK-16.07.2012-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA (Chartered Accountant)
“THE YEAR OF ACQUISITION WHEN PROPERTY RECEIVED UNDER WILL IS SOLD?”
Query 1]
Sir, kindly guide me in the following matter. The basic threshold income which was not chargeable to tax for F.Y 11-12 (A.Y 12-13) is Rs 2.50 Lacs for senior citizen (those who are 60 years of age and above). Now in budget 2012, limits of incomes are revised. Accordingly now what is the limit for senior citizens for F.Y 12-13 (A.Y 13-14)? Kindly clarify. [nikhil.143gotenssj4@gmail.com]
Opinion:
1.      The new income tax slab for the F.Y. 2012-13 (AY: 2013-14) for Individual / HUF is as under:

Individuals/HUF
Senior Citizens
Very Senior Citizens
Rate
Up to 200000
Up to 250000
Up to 500000
Nil
200000-500000
250000-500000
--
10%
500000-1000000
500000-1000000
500000-1000000
20%
Above 1000000
Above 1000000
Above 1000000
30%

2.      There will be no separate category for woman assessee for the FY 2012-13.
3.      Eligible age for senior citizen is 60 years and for very senior citizens is 80 years.
4.      Education Cess (including Higher Education Cess) is same @3% on income tax.

Query 2]
My grandfather purchased a plot in 1952. 1/3rd plot was purchased & 2/3rd was on lease from municipal corporation. He built building on the same in which ground floor was for commercial purpose while upper 2 floors were residential.
My grandfather expired in 1982 & by his "WILL" entire plot was transferred to my grandmother. Now my grandmother expired in Dec 2009 & by her "WILL" it was transferred to my mother. Now, we have decided to sell the said property.
My queries are:
1.      Which year property index will be considered for calculating Capital gain of my Mother? For 1/3rd plot, whether it will be of 1982 or 2009?
2.      As 2/3rd plot is on lease, Stamp duty notional value is calculated at current market rate. So, for calculating capital gain, whether notional market value will be considered or Ash value of the building will be considered?
Kindly advice. [Nirav Vora - nvmarketing.akola@gmail.com]
Opinion:
1.      The property to be sold by your mother is an ancestral property acquired before 01.04.1981. Also, the construction/ addition in the property appear to have been completed before 01.04.1981. The fair market value of the property as on 01.04.1981 could be considered as cost of acquisition of house property for working out capital gain.
2.      The important question here is the year from which indexing benefit would be available? There is a controversy as to the year from which the indexation benefit would be available in such cases. There is a difference in the LITERAL interpretation vis a vis LOGICAL interpretation of the law on this issue. The literal interpretation says that the indexation benefit is available from the year “in which the assets is first owned by the assessee” (i.e., from 2009, in your case) whereas logically it should be same as is available to the original owner (i.e., 1981 in your case).
In view of the judgment in the case of Bombay High Court in CIT Vs. Manjula J. Shah (2012) 204 Taxman 691, I am of the opinion that the indexation benefit in your case would be available from the year 1981-82.
3.      For computing capital gain for both for 1/3rd as well as 2/3rd share of the property sold, the higher of the following would be taken as the value of sale consideration:
a] Actual Sale Consideration received or
b] Valuation adopted by the Registrar of stamp duty for levy of stamp duty

Query 3]
Sir, in the declaration ITR-V (after e-filling), there is a blank space after the word in my capacity. What does it mean & whether I have to fill the blank & sign the ITR-V? [Himansu Sekhar Muduli-himansubbsr@yahoo.co.in]
Opinion:
In the ITR-V (Acknowledgement) generated after e-filing of the income tax return, you have to fill the capacity in which the return is filed. It could be Director/ MD/Authorised Signatories etc in case of Company, Partner/ Authorised Signatories etc in case of firm, Karta in case of HUF, Individual in case of return filed by Individuals, etc.
If the return is e-filed without attaching a digital signature, then ensure to forward the duly signed hard copy of the acknowledgement at the following address:
“Income Tax Department-CPC, Bag No. 1, Electronic city post office, Bangalore-560100”.