The Hindu Business Line : Kindergarten fees qualifies for rebate

WILL fees paid for education in KG classes qualify for rebate under Section 88? Schools charge fees by way of admission fee, monthly subscription, examination fee, tuition fee, annual charges, conveyance and transport charges, security charges, building fund, other charges and miscellaneous charges. Which of these will qualify for rebate?

S. N. Khandelwal

Reply

Under Section 88, tuition fees (excluding development fees, donations or other payments of similar nature) paid for full-time education of any two children of an individual will qualify for rebate. This payment of tuition fee should be to a university, college, school or other educational institutions situated within India. The amount that will qualify for rebate should not exceed Rs 12,000 per child, subject to a maximum of two children. It can be seen that the tuition fee paid for full-time education will qualify for rebate. You are probably concerned on the allowability of rebate since the school timings in LKG and UKG will only be for limited hours. This cannot be a reason to deny the rebate, as the education, though for limited hours, would only have to be construed as full-time and not part-time.

Of the fees, it appears that tuition fee alone will qualify for the rebate. Apart from this item, it appears that the other fees that are stated by you will not be eligible for the rebate as they are not in the nature of a tuition fee.

Query

I have been investing in equity shares since April 2004. Owing to a decline in the value of shares, I have incurred a loss of around Rs 3 lakh. I wish to know how this loss is to be set off against my capital gains that I may earn in future?

Remesh

Reply

You have indicated that you began investing in shares only from April 2004 and also that you have so far run up a loss of around Rs 3 lakh. Apparently, you would have held the shares for less than 12 months. Therefore, the loss would be a short-term capital loss, which can be set off against either under a short-term capital gain or a long-term capital gain in the same year. The balance, if any, which cannot be so set off can be carried forward and set off against either as short-term capital gain or long-term capital gain within eight assessment years immediately succeeding the assessment year in which such loss was first computed.

Query

I had invested Rs 60,000 in shares in my friend's name. These investments were made by way of applying for shares at the time of public offers by the companies. The shares, in the demat account of my friend, are now being traded at more than the allotment price. I now propose to transfer these shares to my demat account. Will there be any tax implications on doing so?

Sreedhar

Reply

There will be no tax implications in this case, since there is in effect no transfer of shares at all. It is just that shares have been transferred from your friend's demat account to yours. The shares, in reality, were always owned by you, as the investment has been made by you in your friend's name, probably for convenience. The transfer now to your account will not amount to a transfer so as to give rise to capital gains tax.

Query

I live with my husband in Japan. We recently bought a flat and also a plot in my name in India. For this, we used the money standing to my credit in the NRE account. Is there any need to register myself for tax purposes in India? Am I liable for wealth tax?

M. Vijayalakshmi

Reply

There is no need for any registration with the I-T department. So far as wealth tax is concerned, one residential house will be exempt. Exemption is also available from wealth tax in respect of a plot of land comprising an area of 500 sq.mts or less. You may, therefore, not be liable for wealth tax. You may, however, have to consider whether these exemptions are available to you and whether the other assets are chargeable to wealth tax in India before coming to a final conclusion. You may note that no wealth tax is payable on the first Rs 15 lakh of net wealth that is chargeable to tax.

Query

I had purchased 1,000 shares of IDBI on February 22, 2003. These shares were purchased in my HUF account. If these shares are sold by the HUF to me, as an individual, after March 1, 2003, will the gains be fully exempt?

Paresh Pandya

Reply

An exemption is available under Section 10(36) if the following conditions are fulfilled:

The income arises from the transfer of a long-term capital asset;

The long-term capital asset is an eligible equity share in a company;

The share was purchased on or after March 1, 2003, but before March 1, 2004; and

The share was held by the assessee for 12 months or more.

Eligible equity has been defined in the section to be shares purchased in the secondary market and where such share is a constituent of the BSE 500 index on March 1, 2003, and where the purchase and sale is entered into on a recognised stock exchange in India.

If the share is allotted through a public issue on or after March 1, 2003, and is listed on a recognised stock exchange before March 1, 2004, and the transaction of sale is entered into on a recognised stock exchange in India, the condition stands satisfied.

No exemption will be available under Section 10(36) in the hands of a HUF since the HUF has acquired the shares prior to March 1, 2003.

When you sell the shares, which you purchase from your HUF, you may be eligible for the exemption under this provision. You may also examine the possibility of getting the exemption under Section 10(38) both in the hands of the HUF and in your hands.

Mail your queries to taxtalk@thehindu.co.in or by post to Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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