The Hindu Business Line : Don't bother about tax, brother

Under Section 56(v) of the Act any sum of money exceeding Rs 50,000 per annum received without consideration by an individual or HUF (Hindu undivided family) from any person is to be treated as income chargeable under the head `income from other sources'. The proviso to the Section, however, among others provides that the sum received without consideration will not be treated as income if the sum of money is received from a relative. The term relative is defined also to include the brother of an individual. The gift received from your brother will, therefore, not be treated as your income and hence will not be taxable in your hands.

I purchased a flat in Coimbatore in September 2003. For this purpose, I had taken a loan. This property has been let out on rent since April 2006. I have purchased another property at Pollachi, where I work. I acquired this property using a loan in November 2005. This property is self-occupied since April 2006. I receive a house rent allowance (HRA) of Rs 4,000 per month from my employer. Can I claim the interest on capital borrowed and the principal repayment of the capital borrowed for both the properties as a deduction. If so, what is the ceiling? S. Mohanasundaram

The interest on capital borrowed and the principal repayment of the borrowed capital of both properties can be claimed as a deduction. In respect of the property at Pollachi that is self-occupied the interest will be allowed as a deduction under Section 24. The maximum amount that may be claimed as a deduction in respect of interest on the loan taken for acquiring this property is Rs 1,50,000.

In respect of the Combatore property, which is let out, the deduction under Section 24 towards interest can be claimed without any ceiling limit. The principal repayment of both the housing loans can be claimed as a deduction under Section 80-C subject to the ceiling limit of Rs 1 lakh. It may be noted that the ceiling limit under Section 80 C will be in respect of various payments and investments one of which is the principal repayment of housing loan.

Since you live in your own house, apparently there would be rent payable by you and, therefore, the HRA would be fully taxable in your hands. You may also note that the net annual value in respect of the self-occupied property at Pollachi would be taken at nil and the net annual value of the property at Coimbatore would be taken as the sum for which the property can reasonably be expected to let from year to year or the rent receivable, whichever is higher, and also that a deduction of 30 per cent of the same will be allowable in computing the income from house property.

Section 88B as it stood up to the assessment year 2005-06 allowed a rebate of Rs 20,000 or the tax payable, whichever is lower. This rebate was available to an individual resident of India who is 65 years old or more at any time during the previous year. Is an individual to be taken as a person eligible for a rebate on his completing 64 years or on his completing 65 years? Will an individual born on December 1, 1939 be eligible for the rebate in the previous year ended March 31, 2004 or in the previous year ended March 31, 2005. Senthil P.S.

Section 88B as it then stood allowed a rebate to a person who is 65 years or more at any time during the previous year. A person can be said to be of the age of 65 years or more only when he completes 65 years and enters the age of 66 and not when he completes 64 years and enters the age of 65.

In the example given by you, the individual will be treated as a person eligible for the rebate under Section 88B only in the previous year ended March 31,2005 i.e. assessment year 2005-06.

I am a salaried employee. I would like to know whether short-term capital gains on sale of shares is to be added to my salary income and taxed at the regular slab rates or whether such gains are to be taxed at a flat rate of 10 per cent.

Can short-term capital losses of a year be set off against short-term capital gains of the same year? What are the tax exemptions on the short-term capital gains from sale of shares? V.Subramanian

The tax rate on short-term capital gains on sale of shares will depend on whether the shares are sold through a recognised stock exchange or otherwise. If they are sold through a recognised stock exchange, securities transaction tax will be payable at the time of the sale and such capital gains will be taxable at a flat rate of 10 per cent (as increased by the appropriate surcharge and additional surcharge).

If not sold through a recognised stock exchange, the tax will be payable on the short-term capital gains at the normal slab rates applicable to you that is to say, that the salary income and the short-term capital gains will be aggregated and the slab rates would be applicable accordingly.

Short-term capital losses of a year can be set off against the short-term capital gains of the same year. No tax exemptions are available in respect of the short-term capital gains arising from the sale of shares.

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