The Hindu Business Line : Will rebate move to the second house as well?

I HAVE a self-occupied house for acquiring which I had taken a loan. In respect of this loan, I am claiming tax rebate under Section 88 as well as deduction for interest under Section 24. I want to take another housing loan to acquire another house. Can I get the said rebate and deduction in respect of this house as well? - M. Prabhakaran, Karur

I presume the principal portion of the annual instalments would aggregate to more than Rs 20,000 — the maximum one can claim rebate on under Section 88.

Even if you have not exhausted your quota of Rs 20,000 set for this purpose, I am afraid, you cannot use the unutilised limit in respect of a second house.

This is because Section 88 talks of `a residential house', thereby putting paid to rebate on more than one house simultaneously.

As far as deduction of interest under Section 24 is concerned, everything would depend upon which house you choose for nil annual value under Section 23(2).

In respect of the self-occupied house for which the nil annual value option has been exercised, the interest that can be deducted cannot exceed Rs 1,50,000 subject to the condition that the house is acquired within three years of taking the loan.

The second house even if self-occupied for one's own residential purpose would be assessed as if it was let out.

Interest in respect of such deemed-to-be-let-out property would be deductible at actuals without any limit.

Nominee nuance

MY BROTHER died and his employer is refusing to pay pension to his mother who was nominated by him for this purpose on the ground that the pension is meant for wife and children of the deceased. Kindly advise. - Simrat Ajmani, e-mail

I am afraid this column does not deal with labour matters. You may, therefore, take appropriate legal advise on the issue. But one understands that employee welfare legislation insists on nomination being revised on marriage.

Apparently this is to safeguard the interests of the immediate family. One also understands that if a person other than wife is the nominee, a No Objection Certificate (NOC) is required to be signed by her. But I urge you to seek appropriate expert advise.

Reimbursement proof

NORMALLY certain components of salary, such as medical reimbursement and leave travel allowance, are retained with the company and are paid on submission of proof of expenses as per the Income-Tax Act. Those who do not wish to use these exemptions take the pay without the retention of the component as the need for such expenditure does not arise considering their existing income-tax liability.

Please advise whether it is necessary for the employer to withhold monthly deduction and then reimburse the sum so deducted on receipt of proof. - T. A. P. Krishnan, email

I would appreciate if you could kindly make the question clearer. While medical allowance is a component of one's salary, medical reimbursement is not. If an employer has the practice of camouflaging medical allowance as reimbursement, I think that would be wrong because the exemption granted by the clause (v) of the proviso to Section 17(2)(vi) is only to "any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family ... so however that such sum does not exceed fifteen thousand rupees in the previous year."

An allowance vests an employee to receive the same as part of his salary while a reimbursement is conditional upon the related expenditure having been incurred already by the employee.

The income-tax law for obvious reasons is lenient on reimbursements vis-à-vis allowances.

44AB limit

FOR the purpose of reckoning the monetary threshold for mandatory tax audit under Section 44AB, does one have to include capital gains as well in the figure of gross turnover? - S. Anandkumar, Bangalore

No, Section 44AB is business or profession specific. In the event, a moneybag with no business or professional income but with considerable capital gains would be spared of the requirement to get his accounts audited.

The reason why the government is targeting in particular businessmen and professional is perhaps they enjoy greater leeway to arrange their tax affairs and must therefore by put under some scanner.

JB jab

IS INTEREST under Sections 234B and 234C chargeable after considering the credit available under Section 80JB? - S. Anand Kumar, Bangalore

I am afraid there is no such Section as 80JB in the Income-tax Act. Perhaps, you are referring to tax holiday under section 80-IB.

If you are entitled to tax-holiday which is why you have not paid advance tax or which is why you have paid lesser advance tax as warranted, there is no way interest can be charged under Sections 234B and 234C.

Advance tax liability is to be calculated after giving effect to all the exemptions and deductions available under the income-tax law on the facts and circumstances of the case.

Late filing?

WHEN the last date for filing the income-tax return happens to be a holiday, would the return be deemed to have been filed on time if it is filed on the immediately following working day? - R. M. Subramniam, e-mail

Yes. Circular No. 639 of November 13, 1992, says "where the last day for filing return of income/loss is a day on which the office is closed, the assessee can file the return on the next day afterwards on which the office is open and, in such cases, the return will be considered to have been filed within the specified time limit."

Dealer or investor?

IF A person is a day trader in a stock exchange, will he be called a dealer or an investor? - Arthi Jayaraman, e-mail

The income-tax law does not specify the circumstances in which a person will be treated as a dealer and the circumstances in which he would be treated as an investor. But there is a catena of case law on the issue. The Supreme Court in Raja Bahadur Vishweshwar Singh vs CIT (1961 41 ITR 685) held that purchase and sale of shares for substantial amounts at frequent intervals cannot be treated as change in investments but treated as dealings in shares.

A day trader is, therefore, a dealer. But even he masquerades as an investor, the tax department would not be financially affected because the rate of tax on business income and short-term capital gains is the same.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

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