The Hindu Business Line : No pay-offs from play school

I am bank employee. I have a three-year-old daughter who is in play school. I payRs 7,200 per annum as school fees. Will I be able to claim deduction under Section 80C in this respect? A. Prashant Kumar

Under section 80C, 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 deduction. This payment of tuition fee should be to a university, college, school or other educational institutions within India. The amount that will qualify for deduction will be only such sums paid for two children of an individual. Further, the Section requires that the purpose of the payment of fee be towards full-time education. In your case the fee paid would not qualify for the deduction because this cannot in the strict sense be called a tuition fee nor can it be called a school regardless of the nomenclature used in the receipt given by the institution.

I am a salaried employee. I have accumulated my savings in bank accounts. I intend using these savings to invest in shares in the primary and secondary market. Will I be liable for wealth tax if my savings in the bank account exceeds Rs 15 lakh? Sadhana Sanghavi

Balances in bank accounts are not assets within the meaning of the Wealth Tax Act. This would mean that any amount of balance in a bank account would not be included as an asset for wealth tax purposes. Hence, even if your bank balance exceeds Rs 15 lakh you will not be liable to wealth tax merely on that basis.

I purchased a flat in Kolkata with a housing loan in November 2005. I propose to repay the housing loan before September 2007. Will I be eligible for tax benefits in respect of interest and principal repayment of the loan? Tapan Das

The principal and the interest payment will qualify for deduction. Interest will qualify for deduction under Section 24. The maximum amount that you can claim as deduction under Section 24 if the house is self-occupied is Rs 1,50,000. If, however, the property is let, the interest can be claimed as a deduction without any ceiling limit. The principal repayment will qualify for deduction under Section 80C. The maximum amount that will qualify for deduction under Section 80C will be a sum of Rs 1,00,000. You may note that Section 80C allows a deduction in respect of certain payments and investments.

My father had taken a loan to construct a house. He took more loans for the improvement of the same. He pays EMI from his salary . I propose to buy the house from him; I will be taking a loan to do so. I will be paying the amount due by my father to the bank and pay him the balance. Will I be able to claim tax benefits in respect of the loan that I take, since the transaction is between my father and me; also my father will continue to reside in the same house. My sister also has a claim over the property.

My father does not maintain accounts. How is the cost of acquisition to be computed for capital gains purposes? Perumal

There would be no prohibition on your claiming the deduction in respect of the interest and principal payable by you on the housing loan so long as it is taken from a bank or other approved institution.The interest can be claimed as a deduction even if it is payable otherwise than to a bank or other approved institution. The fact that the transaction of purchase and sale is between father and son or that your father will continue to reside in the same house will not affect the claim for the deduction.

You have stated that your sister has a claim on the property. The facts stated by you, however, show that the property is self-acquired by your father unless the land was ancestral. That being so, the question of your sister having a claim on the property does not appear to be right if the property is self-acquired. The cost of acquisition of the property will have to be taken based on the amount spent for purchase of the land and the cost of construction of the building.

If no accounts are maintained the only possible recourse to find the cost of construction will be to take a valuation report from a registered valuer.

It is possible to substitute the fair market value as on April 1,1981 as the cost of acquisition if the property has been acquired prior to this date, if it is more beneficial to your father.

Interest that is not claimed and allowed as a deduction can be treated as part of the cost of acquisition.

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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