Saturday, August 25, 2012


BY CA. NARESH JAKHOTIA (Chartered Accountant)

Query 1]
I am born on 15.09.1953. My 60th birthday falls on 15.09.2012. Kindly tell whether I will be considered as senior citizen for the purpose of Income Tax for the financial year 2012-13? [B.S. Moroney, Himalaya Apartments, Canal Road, Ravinagar, Nagpur – 440033]
You are born on 15.9.1953 & will be attaining the age of 60 years on 15.9.2013. Accordingly, for the F.Y. 2013-14, you’ll be considered a Senior Citizen for the purpose of Income Tax Act-1961. For the F.Y. 2012-13, you will not be entitled to the higher basic exemption limit as applicable to the senior citizen.

Query 2]
1.      There is a reference to Accounting Standards notified by the Central Government in Section 145(2) of Income Tax Act. Kindly enlighten me where I can locate these Accounting Standards on the internet. I find the Accounting Standards laid down by the Institute of Chartered Accountants of India in their website. But presumably these are not the same as those notified by the Central Government under Section 145(2) of I.T.Act-1961.
2.      In case a tax-free gift is received by an assessee, where is it to be shown in the income tax return which is submitted online? []
1.      The Accounting standards as mentioned in Section 145(2) of the Income Tax Act-1961 are same as those issued by the Institute of Chartered Accountants of India & the same are easily accessible at
2.      The gift received has to be the part of the Capital A/c and same could be reflected by incorporating it in ITR-4 in case of return to be filed by an Individual/HUF. If, however, return is to be filed in ITR-1/2/3/4S, the same cannot & need not be disclosed in the return to be filed.

Query 3]
A jointly owned property (4 Co-owners are there) has been given on lease to a company for an annual rent of Rs. 6 Lacs i.e., Rent of each of the co-owners is of Rs. 1.50 Lacs each. The company paying rent after deducting the TDS. The lesessee is demanding the rent without TDS as the rental payment though collectively is exceeding Rs. 1.80 Lacs is less than the applicable ceiling of Rs. 1.80 Lacs in the hands of individual co-owners. Please guide as the legal position as applicable in such case? Whether TDS is applicable or not? Can the Rent be paid without TDS in such case? Please elaborate the legal position with case laws, sections & other material as may be available as we are getting contradictory legal opinion on the aspects?  [CA. Rajesh*******]
1.      Section 194-I of the Income Tax Act provides for deduction of tax at sources from payment of rent. According to section 194-I, any person (other than individual/HUF with turnover less than the limit specified in section 44AB in immediately preceding financial year), who is responsible for paying to a resident any income by way of rent is required to deduct tax at sources at the prescribed rates. No tax is deductible on the rent payment if the amount of such rent credited or paid or likely to be credited or paid during the financial year to the payee landlord or lessee does not exceed RS. 180,000/- [w.e.f. 01-07-2010]. (Prior to 01.07.2010, the limit was Rs. 120,000/-)
2.      TDS on rental payments is prescribed at the rate of:
a)      @ 2% for payment towards the use of any machinery or plant or equipment.
b)     @ 10% for the use of any land or building or furniture or fittings for all persons.
c)     The rate of TDS will be @ 20% in all cases, if PAN is not quoted by the deductee with effect from 01-04-1010.
3.      Section 26 provides that where the property is owned by two or more person then the income from such property shall not be assessed as income of association of person (AOP). Instead, the share of each such person in the income from the property shall be included in his total income, if the following condition are satisfied:
a] The property consists of buildings or buildings and land appurtenant thereto, and
b] Respective shares of such persons are definite and ascertainable.
4.      The clarification issued by the Central Board of Direct Taxes vide Circular No. 715 dated 08-08-1995, particularly to the question No. 22 and its answer, is as under::
“Question 21 : Whether the limit of Rs, 120,000 per annum would apply separately for each co – owner of a property ?
Answers : Under section 194–I, the tax is deductible from payment by way of rent if such payment to the payee during the year is likely to be Rs. 120,000/- or more. If there are a number of payees, each having a definite and ascertainable  share in the property, the limit of Rs. 120,000/- (Now Rs. 180,000/- per annum) will apply to each of the payees/co – owners separately. The Payers and payee are however, advised not to enter into sham agreements to avoid TDS provisions.”
[The limit at the time of issue of this circular was Rs. 1.20 Lacs which is now enhanced to Rs. 1.80 Lacs]
5.      My Opinion:
Going through the provision of Section 26, section 194-I, CBDT clarification and decided cases, I am of the opinion that the limit of Rs 180,000//- specified in section 194-I will apply individually to each co-owner provided that their share in the property is definite and ascertainable.
6.      The few of the cases which can be relied upon in support of the above view are as under:
a] Gora Chand Sen v. CIT (1985) 154 ITR 435 (Cal).
b] Tulsidas Kilachand v. CIT (1987) 63 CTR (Bom) 324.
c] CIT v. Nauseer K. Kanga (1979) 120 ITR 404 (Bom).
d] Ashok Kumar Agrawal v. ITO (2007) 13 SOT 321) Luck Trib).
e] CIT v. Lally motors (2008) 19 (I) ITCL 43 (P&H – HC).
f] Oriental Bank of Commerce v. ITO (2006) 99 TTJ (Chd – Trib) 1235.
g] CIT v. Manager, State Bank of India (2009) 226 CTR (Raj) 310

Saturday, August 18, 2012


BY CA. NARESH JAKHOTIA (Chartered Accountant)


Query 1]
Sir, Husband & Wife both are working. Husband has invested all his savings & avail a housing loan while purchasing of residential flat. Residential flat & Housing loan is in joint name. Husband’s monthly earnings are sufficient for his family maintenance & Housing loan EMI only. There is no surplus left in the hands of the husband.
They have mutually planned that the earnings of wife should be invested for first Daughter’s Education, Marriage & rest for their retirement planning. They have obtained a floating mediclaim plan for any unwanted medical treatment of Rs. 3.50 Lacs. I would like to know in what proportion their investments should be made i.e.
1.      In the name of wife only or
2.      In the name of husband only or
3.      In the name of husband & wife equally or
4.      In the name of daughter.
Following additional aspects may further be considered:
1.      Advice the planning for investments in such a way that no one can
suffer in case of any uncertainty or major medical problem arises
around Rs. 10-15 Lacs in the family.
2.      Whether wife can claim Interest & Principal repayment of Housing
loan under the Income Tax Act, if only husband repays from his earnings
only? [Sara]
1.      It’s indeed a query with lot of practical relevance and need a sensible & personalized individual approach. The money doesn’t have any colour & whosoever invests gets the same value for it. In a family, flow of funds plays a very vital role in taxability and accrual of income therefrom. Under the Income Tax Act-1961, the movement of funds also determines the admissibility & availability of deduction. By whom or in whose name the amount should be invested vary significantly depending upon various factors like
- applicable slab of the individuals investor
- nature of investment-long term or short term
- nature of income yielding i.e., tax free or taxable
- risk element involved therein
- present & future income out of the investment etc.
The investment in the name of wife or husband or major/ minor child need to be done after considering various other factors also & it is practically impossible to standardize or advise it in totality in an isolated manner.
2.      Normally, most of the deductions are admissible subject to the condition of payment. The deduction u/s 80C towards the repayment of the principal portion of housing loan would not be available to wife if
a] the husband pays the amount
b] the same is paid by & on his own behalf by the husband and
c] the amount appears to be non recoverable from wife.
However, if the correct accounting treatment is given in the books & Balance-sheet to show that the amount though paid by husband is indeed paid on behalf of the wife as well and the same is recoverable or adjustable against other amount, the wife could also claim the deductions. The same is the case with the claim towards interest on housing loan.
Query 2]
I have some queries regarding wealth tax. Can you please clarify them:
1.      What is wealth tax? 
2.      On what items it is applicable?
3.      Is it applicable on House, Flat, Agricultural Land, Open Plot, Gold and Silver jewellery etc?
4.      What is the rate for each items?
5.      If applicable on these, what is the maximum limit a person can invest so as not to attract wealth tax. []
  1. Wealth tax is charged for every assessment year on the “Net wealth” of every individual, HUF and company.
  2. It is charged @1% on the amount by which the net wealth exceeds Rs.30,00,000/-.[Section 3].
  3. It is applicable to all except the following:
(a)   Section 25 company (b) Co-operative society (c) Social club (d) Political party (e) Mutual fund specified u/s 10 (23D) of the I.T.Act. [Section 45]
  1. For the levy of wealth tax, Assets under Section 2 (ea) means –
1.      House- Any building or land appurtenant thereto whether used for residential or commercial purposes or for the purpose of maintaining a guest house or a farm house in an urban area.
Exceptions- Houses which are.
(a)   mean exclusively for residential purposes and which is allotted by a company to a whole time employee (including officer or director in whole time employment), having gross annul salary of less than Rs.5 lacs.
(b)  Stock-in-trade.
(c)  Occupied for business or profession of the assessee.
(d)  Residential property and which is let out for a minimum period of 300 days in the previous year.
(e)  Commercial establishments or complexes.
2.      Motor cars-Except that which is used in the hiring business or as stock-in-trade.
3.      Jewellery-Except that which is used as stock-in-trade
4.      Yachts, boats and aircrafts-other than those used for commercial purposes.
5.      Urban land-any land situated in urban area.
(i)                Land on which construction of a building is not permissible under any law.
(ii)             Land occupied by any building which has been constructed with the approval of the appropriate authority.
(iii)           Unused land held for industrial purposes up to 2 years
(iv)             Land held as stock-in-trade up to 10 years.
6.      Cash in hand-For individuals and HUF’s, in excess of Rs.50,000/- and in the case of any other person, any amount not recorded in the books of account.
 E. Net Wealth- Section 2(m)- The difference between aggregate value of assets and the value of all debts owed by the assessee on the valuation date which have been incurred in relation to the said assets. There is no separate rate for individual items. Net Wealth is liable for wealth Tax.
  1. Valuation date means the last day of previous year.

Sunday, August 12, 2012


BY CA. NARESH JAKHOTIA (Chartered Accountant)
Query 1]
Sir, with reference to the Tax Talk edition dated 25th June 2012, regarding Form No. 15G submission, Please clarify as to when it can be submitted? My total income from interest & salary is Rs. 2.60 Lacs for the financial year 2012-13 and after Section 80C deposit of Rs. 80,000/-, my income is reduced to amount below the taxable limit. In these circumstances, can I submit form 15G to bank and to submit IT return is optional
or compulsory? It may be noted that I have received salary from 2 sources.
1.      Form No. 15G- When can be submitted:
Form No. 15G is a declaration which can be filed by non senior citizens if the following two conditions are satisfied:
a) The final tax on his estimated total income computed as per the provisions of the Income Tax Act should be NIL [Section 197(1A)], and
b) The aggregate of the interest etc. received during the financial year should not exceed the basic exemption limit [Section 197(1B)],.
If both the conditions are satisfied, Form No. 15G may be furnished (before the payment or credit whichever is earlier) and in such case, the entire interest income can be paid without deduction of tax at source.
In your case, if your interest income is below the basic exemption limit (which is Rs. 2 Lacs for the FY 2012-13 for non senior citizen assessee) then you can submit Form No. 15G to the bank.
2.      Filing of Income Tax Return- Whether Mandatory or not?
Individual/HUF/AOP are required to file the income tax return only if their Income before allowing deduction under chapter VIA (i.e., section 80C, 80D, 80G etc) and exemptions u/s 10A, 10B or 10BA exceeds the exemption limit. In your specific case, your Gross total Income is Rs. 2.60 Lacs which is above the basic exemption limit and hence you are compulsorily required to file the return of income even though the ultimate tax liability would be Nil.

Query 2]
My wife & myself are Senior citizens aged 64 years & 66 years respectively. Presently, our income is below the basic tax exemption limit of Rs. 2.50 Lacs. However, we are regularly filing our Income Tax returns because we have income from Bank FD’s .We had two separate plots, on our individual name which were purchased during FY 1994-95 for Rs. 76,000/- each. These two plots have now been decided to be sold for Rs. 10 Lac each. Hence for calculating the LTCG I wish to know the following from you:
1.      What is the cost of inflation index (CII) for the F.Y.1994-95 and 2012-13?
2.      Whether the gap between the regular net income and the basic tax exemption limit of Rs. 2.50 Lac can be adjusted against the calculated LTCG?
3.      Whether 5 years bank deposits of Rs. 1 Lacs can be exempted for tax purpose u/s 80C?
4.      Whether the REC Tax Saving Bond being issued can be purchased for the entire LTCG amount for saving of I. Tax u/s 54 EC so as to make the Tax liability Nil?
5.      Whether NIT payment of Rs. 22,800/-per plot required to be paid for obtaining NOC can be deducted while calculating LTCG?
6.      What is the present tax rate for LTCG?
7.      Whether the maturity amount of REC bonds, after three years will be taxable? Kindly reply suitably. []
1.      Cost Inflation Index (CII) for the F.Y. 1994-95 is “259”. The CII for the FY 2012-13 has not been notified yet.
2.      The unutilized basic exemption limit (i.e., the gap between the regular net taxable income and the basic tax exemption limit) can be adjusted against the amount of Long Term Capital Gain (LTCG). The resultant LTCG only would be taxable.
3.      No deduction u/s 80C (including 5 years notified bank FDR) is admissible against LTCG. However, as a tax planning tool, assessee can claim deduction u/S 80C from other regular income (other than LTCG) which will have the effect of increasing the unutilized basic exemption limit. The increased unutilized basic exemption limit can then be adjusted against the LTCG.
4.      By investing the amount of LTCG in the specified bonds issued u/s 54EC, Assessee can reduce the LTCG tax liability to Nil.
5.      NIT payment of Rs. 22,800/-per plot to be paid by the seller for obtaining NOC can be reduced while calculating LTCG.
6.      LTCG is presently taxable at a special rate of 20% u/s 112 of the Income Tax Act-1961.
7.      The principal amount of REC Bonds received back after a period of 3 years at the time is not taxable.

Query 3]
Sir, I have applied home loan for purchase of land & construction of house. Bank has sanctioned Rs. 6 Lacs towards purchase of land under home loan scheme in April-2011 and informed that construction loan would be sanctioned separately after transfer of plot in my name, sanction of house map by competent authority etc. The process is going on & construction work is yet to be started. I am paying EMI of Rs. 6,000/- to bank since April, 2011 under home loan scheme.  My query is shall I be eligible exemption of Income Tax on EMI being paid to the bank? Under which section, EMI Payment is exempt & how much tax relief will I get? Please provide your valuable advice on above. []
1.      EMI of Rs. 6,000/- paid by you includes both Interest & Principal.
2.      Deduction towards interest on Housing Loan is governed by section 24(b) of the Income Tax Act-1961.The interest paid on housing loan prior to completion of the construction of the house property is not allowable as deduction.
3.      The interest pertaining to the period from the date of availment of the loan to the 31st March immediately preceding the date of completion of the house property is classified as “Pre-construction period Interest” Interest in respect of pre-construction period is deductible in five equal annual installments commencing from the previous year in which the house is constructed.
4.      In your specific case, no deduction towards interest is admissible u/s 24(b) till the year of completion of the construction of the house property.
5.      As far as the repayment of the principal portion of the loan is concerned (which is included in your EMI of Rs. 6,000/-), the same is eligible for deduction u/s 80C subject to overall limit of Rs. 1 Lacs. Even if the construction is not completed, the deduction is admissible as there is no bar or limitation in claiming deduction u/s 80C in such case.

Saturday, August 4, 2012


BY CA. NARESH JAKHOTIA (Chartered Accountant)
Query 1]
In a Divorce case, I want to know the following as per the provision of income tax law:
1.      It has been decided to pay Baran Poshan (One time payment to my spouse on divorce by Mutual Consent) amount of Rs. X to my wife. Whether this amount is taxable at the other end i.e. at my wife end, who is the receiver of the amount?
2.      The amount Rs. X to be paid to my wife, can it be contributed by my family members like mother, father from there saving account shown in the Income Tax as I am unemployed from the last 6 months due to health problem?
3.      The advance amount of Rs. Y paid to my wife during the first hearing of the Mutual Consent Divorce, should I show the same in my Income Tax Return for the Assessment Year 2012-13 as the amount Rs. Y has been paid through cheque and the same has been debited from my saving bank account passbook?
I therefore request you to please guide me. []
1.      Being a capital receipt, one time payment (Bharat Poshan) received by the spouse would not be taxable in her hands.
2.      The contribution of the amount by other family members would not carry any income tax implications as such.
3.      The amount paid could be debited to the capital account. If you are filing either ITR-4 or 4S, the capital account would incorporate the same. If however, you are filing ITR-1, 2 or 3, there is no requirement to reflect the same.

Query 2]
1.      If a person is employed with two employer then whether he can claim deduction of Conveyance allowance (i.e., Rs. 9,600/-) from both the employer?
2.      If a person books a flat & then sold its booking whether he can claim exemption u/s 54 for short tem capital gain. ? [ca.seema******]
1.      It’s a very interesting query indeed where two different views are possible. There is nothing specific in the Income Tax Act/ Rules to express one sided opinion on the issue. One can form an opinion that section 10(14) read with Rule 2BB restricts an exemption towards conveyance allowance to Rs. 800/- per month for both the employments taken together. The possibility of another interpretation that Rs. 800/ per month is a deduction admissible per employment and not per assessee cannot be over ruled. I have a conservative opinion & of the view that Rs. 800/- per month deduction is available per assessee and not separately for each employment. 
2.      No deduction is admissible u/s 54 towards Short term capital gain. Exemption u/s 54 is available only if the assessee has Long Term Capital Gain (LTCG).
Query 3]
Sir, My late father (Retired MH. state govt. servant) had an amount of Rs. 3,75,000/- in a bank. After his death, the amount was claimed by my mother & the said amount was transferred to her account in the same bank. Out of the fund so transferred, she has kept an amount of Rs. 2,00,000/- in FD for three years. Also, an amount of Rs. 1,25,000/- (a DD) which my father had in other bank, was deposited in the above said bank A/c. My mother is a housewife and 58 years old.  She is PAN card holder. Now my queries are
1.      Whether my mother has to file the income tax return?
2.      If yes, which form of ITR she has to submit?
The income of your mother appears to be below the basic exemption limit & if it is so, the income tax return filing by her is not mandatory. It may be noted that the basic exemption limit for non senior citizen – female assessee is Rs. 1.90 Lacs for the AY 2012-13 & Rs. 2.00 Lacs for the AY 2013-14.

Query 4]
While e-filing the income tax return, TDS certificate number is required to be furnished in the table at S. No. 24, Column no. 5 (Form No. 16A). I am trying to fill in the TDS certificate No’s issued by my banks that are in alpha characters. However, this alpha character certificates No’s. are not accepted in the system. Please advice as to how this alpha character certificates No’s. are to be inserted in the table? [Shripal budavi -]
You can e-file the return without quoting the Alpha character certificate number also. Quoting of the six character Alpha TDS Certificate number generated by the NSDL, as mentioned on the right top side of the TDS Certificate is not mandatory in Column No. 5. The return could be validated & uploaded without quoting of this alpha character certificate number. In my opinion Income Tax department has inserted this column to educate and digest these new features by all taxpayer in voluntary manner so that there is a smooth run when this field is declared as mandatory field and Income tax department is planning to do so from FY 2012-13 Assessment year 13-14. In your case, the non acceptance of the alpha character certificate number could be due to the usage of old forms or software from your side. If you wish to file the return only by quoting the Certificate Number, then you may try further by uploading the return using the latest schema of the form from

Friday, August 3, 2012


BY CA. NARESH JAKHOTIA (Chartered Accountant)
Query 1]
Sir, I am a pensioner getting around Rs. 2 Lacs per annum. After including MIS, NSC, etc Interest, total income works out to approx Rs. 2,72,000/-. I am investing Rs. 75,000/- in the tax saving instruments. After availing basic exemption of Rs. 2, 40,000/-, my tax is Nil. Please advise me whether I have to file a return? I have been told that according to latest development, no return is required to be filed if the income is up to Rs. 5 Lacs. []
For the FY 2011-12 (A.Y: 2012-13),
1.      You would not be required to file the return of income if you are a very senior citizen (80 years & above) as the basic exemption limit is 5 Lacs for very senior citizen.
2.      If, however, you are below the age of 80 years, you would be required to file the return of income as the basic exemption limit would be Rs. 2.50 Lacs only & your gross total income is exceeding Rs. 2.50 Lacs.

Query 2]
Sir, please provide the following information in making/ taking a gift:
1.      Whether it is to be executed on a judicial/non judicial stamped paper?
2.      Whether it is to be registered in any Government office?
3.      Whether Donor or Donee is to be a PAN card holder?
4.      What should be done to inform the IT Department about the execution to avoid tax deduction? Any other information to make the execution perfect & correct in all respects from Income Tax point of view.
1.      For the purpose of Income Tax Act-1961, you can make the gift even by simply executing the gift deed on plain paper
2.      Registration is not mandatory for gift of moveable property. However, for Gift of immoveable property, Registration is compulsory under the Registration Act.
3.      PAN is not mandatory for making a gift.
4.      There is no specific provision/ Law to inform the IT Department about the gift done or to be done. Also, the gift is not subject to the TDS provision.

Query 3]
1.      My father is a regular income tax & wealth tax assessee. Two year back, he has constructed a commercial complex in Raipur on which he is generating an annual rent of Rs. 7.20 Lacs. He has paid the wealth tax on the commercial complex as well, in addition to income tax on the rental income received. I read somewhere that no wealth tax liability arises in such cases. The other opinion that we have received is that the wealth tax will not be applicable if it is used for own business. Please clarify whether wealth tax is applicable in my father’s case? Please also advise if it is not applicable, whether I can get back the wealth tax already paid in the previous year?
2.      In one of our closely held company wherein myself & my father are the only shareholder & Director, the sales has increased by 62% as compared to previous year. Whether as a result of such a drastic increase in sales, the company can pay additional commission of say 25% more as compared to the percentage of sales commission paid in earlier year? I have been told that the excess commission is disallowable u/s 36(1)(ii). However, I think that the excess commission is logical & justifiable and hence can be allowed. Please Advice. []
1.      Any property in the nature of commercial establishment or complex is not an asset under section 2(ea)(i)(5) of the Wealth Tax Act & accordingly it is not chargeable Wealth Tax. It may be noted that u/s 2(ea)(i)(5), it is not necessary that the property in the nature of commercial establishment or complexes should be occupied by the assessee for the purpose of his own business or profession, carried out by him only. What is necessary is the use of the property, irrespective of the fact whether it is used or occupied by the assessee himself or by anyone else for the purpose of any business or profession carried on by them.
In your case, you have already filed the return & paid the tax. If there is mistake in the original return filed, a revised return can be filed before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier.
If however, said time limit has expired, a rectification application can be filed u/s 35 of the Wealth Tax Act.
2.      The facts & circumstances of each & every individual case determines the availability of deduction u/s 36(1)(ii) of the Income Tax Act-1961. If the extra commission is paid for the services rendered & justified for the reason given in the query, the same would be allowable as expenses. It may be noted that the commission paid in lieu of dividend or profit, the same will be disallowed [Loyal Motro Service Co. Vs. CIT (1946) 14 ITR 647 (Bom)].