The Hindu Business Line : Double trouble for dad?

I have three children, including a set of twins, and all are in school. I pay tuition fee for their education. Can I claim tax deduction under Section 80-C in respect of all my children? Can I claim tax deduction for the fee I paid for doing a part-time BE course ? A. Rajamanickam

Section 80-C allows deduction in respect of tuition fees but it restricts the claim in the case of an individual to two children. You can, therefore, claim the deduction in respect of two of your children.

Rule 2B of the Income Tax Rules, which talks of the limit in respect of exemption under Section 10(5) on LTA, makes a specific provision that multiple births after the first child can be taken into account for the purpose of the exemption. There is no corresponding provision in Section 80-C and, therefore, you cannot claim the benefit in respect of a third child, even though they were born subsequently as twins.

You cannot claim tax deduction for the fee paid to a university for doing a part-time BE course. Section 80-E only permits the payment of interest on a loan taken from certain institutions for higher studies to be claimed as a deduction and that too only when higher education is full time for any graduate or post-graduate course in engineering, medicine, management or for post-graduate course in applied sciences or pure sciences, including mathematics and statistics.

This is with reference to a response that appeared in this column (January 22). The author stated that the expenditure relating to distribution of gold and silver as incentives to dealers by an assessee is not liable to fringe benefit tax (FBT), on the basis of the answer to question No. 61 in the CBDT"s Circular Number 8 of 2005.

I would like to draw attention to the answer to question No. 97 of the same Circular, where it is stated that gifts given under a trade scheme for promotion of company's product to distributors/retailers is a gift and will be subject to FBT. Given the contradiction, please clarify. K. S. Deshpande

I thank the reader for pointing this out. This columnist was initially of the view that only employee related expenses would be subject to FBT. The amendment made by the Finance Act, 2006, relating to taking the expenses by way of distribution of samples to doctors or payments to persons of repute for promoting sale of goods or services of the business of the employer outside the ambit of FBT, makes it clear that it is intended by the legislature to bring even expenses which are unrelated to employees within the ambit, for otherwise there would have been no reason to exclude such expenses which are unrelated to employees.

This amendment makes it clear that expenses, which are not related to employees, will also be subject to FBT. At any rate, the issue you have raised relates to an anomaly in the CBDT Circular where at one place it states that expenditure on incentives given to distributors for meeting quantity targets is not liable to FBT (answer to question No. 61) while at another, it states that gifts given for promotion of company's products is liable for FBT (answer to question No. 97). The Circular contains such contradictions and the only reconciliation between the two , appears to be to interpret the answer to question No. 61 to mean that FBT will not be attracted if the incentive by way of free goods is on achieving targets, and answer to question No. 97 to mean that FBT will be attracted if the gift is towards future promotion of the products of the employer.

I took a loan for the construction of my house. I have paid pre-EMI interest of Rs 34,000 and Rs 56,000 for the years 2004-05 and 2005-06. Construction of the house has been completed and I have been paying EMI post-completion. I understand that I can claim the pre-EMI interest in five equal annual instalments beginning from the year in which the purchase or construction was completed, that is, from the current year subject to the ceiling limits. Can my employer take into account the particulars of my pre-EMI interest to determine the tax to be deducted at source or should I make a claim while filing my income-tax return? Girish S. Sharma

Section 192 of the Act requires an employer to deduct tax at source on salary. The Section also permits an employee to give the particulars of his `other incomes' to his employer who is then required to deduct tax on such other income as well. The Section, however, prohibits an employee from giving particulars of loss under any head except under that of income from house property. There is no prohibition in the Section of giving the particulars in respect of income from house property even if the same is a loss. The Section also does not prohibit the employee from giving particulars of the pre-EMI interest, which is allowable as a deduction under Section 24 in computing income from house property. You may, therefore, give the particulars of the pre-EMI interest claimed as a deduction by you in computing the income from house property to your employer who can take the same into account in computing the tax deductible at source.

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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