The Hindu Business Line : How much of my prize money will the taxman prise away?

In the financial year 2005-06 one of my friends won Rs 64 lakh in the game show `Kaun Banega Crorepati'. Tax of Rs 24 lakh has been deducted at source on the payment made. My friend does not have any other source of income. Will it be possible for him to file a return claiming the basic exemption of Rs 1 lakh and claim a refund?

Khurshid Ahamed

The tax rate in respect of income from winnings from lottery, crossword puzzle, race (including horse race), card or any other game of any sort, gambling or betting of any form or nature is to be computed in accordance with Section 115BB. This section requires such income to be taxed at 30 per cent (as increased by the appropriate surcharge and additional surcharge) and the balance of total income at the appropriate rates applicable to that individual.

In the instant case, your friend does not have any other income other of the above nature. This would mean that the entire income by way of winnings would be subject to tax at 30 per cent (as increased by the appropriate surcharge and additional surcharge). The benefit of basic exemption will, therefore, not be available. At any rate, applying these rates, tax should have been deducted only to the extent of Rs 21,54,240. This would mean that the excess over this, which has been deducted, can be claimed as refund.

In 2000, my wife and myself jointly purchased a land in Mysore and constructed a house. We had taken a loan from the bank for six years and during the first two years, the tax benefits were claimed by me while in the subsequent four years it was claimed by my wife. This house is currently occupied by her parents. In 2006, I purchased a new flat, which is registered in my name in Bangalore. Can I claim tax benefits in respect of the EMI for the new flat?

Ravi Iyengar

So long as you are the owner of the property, which you have purchased in Bangalore, there should be no difficulty in your getting the tax benefits in respect of the EMI that is paid on the loan taken to purchase the flat. However, from your query, it is not clear whether the Mysore property is in fact owned by you or by your wife or jointly, though you have indicated that it is registered in joint names.

This doubt arises since you have claimed the full tax benefits in the first two years of the loan, which can be done only if you are the sole owner. You have also stated that your wife has claimed the full tax benefits in the subsequent four years, which would not have been possible if you are the owner. You may, therefore, have to check the correctness of the claim in respect of the tax benefits of the Mysore property.

My wife is a school teacher. My daughter is also studying in the same school in the first standard. The school does not charge tuition fee directly for my daughter's education but instead has increased my wife's salary by Rs 12,000, and recovered the same towards fees for the education of my daughter. Will tax deduction under Section 80C be available?

T. P. Bhola

There should be no difficulty in your wife claiming deduction under Section 80C in respect of the tuition fee of your daughter. The Rs 12,000 added to your wife's salary would be taken as income and the same, when adjusted towards your daughter's tuition fee, should be allowed as a deduction under Section 80C. However, as proof of having paid the said tuition fee and to claim the benefit, a receipt from the school must be enclosed by your wife.

I am an LIC agent. I live in a rented house. With the removal of Section 80GG, how will I be able to claim the tax benefit in respect of the rent paid by me?

Rakesh Bhandari

You may note that Section 80GG has not been removed and that, therefore, you can claim the benefit under this section subject to your satisfying the conditions under this section.

I am currently employed, but plan to quit by end-June and take up higher studies from July.

Given that I will be quitting my employment and earning salary only for three months in the current financial year, my income will not exceed Rs 1 lakh, the maximum amount not chargeable to tax.

Can I request my employer not to deduct tax at source under these circumstances or, alternatively, if necessary, request my employer to deduct tax at source from my salary in the event of my not quitting my employment from July?

J. Sharma

You can request your employer not to deduct tax at source on your salary from April to June given that you would be quitting employment.

In the event of your not quitting, your employer can deduct the tax for the year on your salary from July 2006 onwards. You may note that Section 192(3) specifically provides that an employer may, at the time of making any deduction, increase or reduce the amount to be deducted under the section for the purpose of adjusting any excess or shortfall arising out of any previous deduction or failure to deduct during the financial year.

If I were to purchase a second-hand car taking a loan from a bank or finance company, will I be able to get any tax benefits on the EMI paid by me?

Hemant

You have not indicated whether you are a salaried employee or a person having income chargeable under the head `profits and gains of business or profession'.

If you are a salaried employee having no business income, no tax benefits can be claimed in respect of the EMI on the car loan.

If you have business income and the car is to be used for business or profession, you can claim the interest as an allowable business deduction under Section 36(1)(iii) as also depreciation under Section 32 on the car.

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