The Hindu Business Line : How taxing was my trip?

I am an employee of a company and I went on leave in calendar 2005 for the first time. I did not furnish proof of travel to my employer and therefore he did not allow me the benefit of the exemption in computing the tax to be deducted at source. Will it be possible for me to claim the exemption while filing my return of income? — Vidya Shikerkar

You can file an income-tax return and in this make the claim for exemption under Section 10(5) of the Income-Tax Act. You can also enclose the proof of expenditure having been incurred for the purpose of claim of the exemption, which will be available, if you are in receipt of leave travel allowance. From the query one thing that is not clear is whether you have already filed the return or not. If not the return can now be filed along with the claim for exemption. Otherwise, a revised return may have to be filed to claim the exemption.

I purchased an agricultural land last year. I propose to sell the same and purchase another agricultural land. Will I be eligible for any exemption? — K. Perumal

Section 54B provides for an exemption where there is the transfer of an agricultural land and reinvestment in another agricultural land. The conditions for getting the exemption are as follows:

The gain arises from the transfer of farm land used for agricultural purpose in the two years immediately preceding by the transferor or his parent.

New agricultural land should be acquired within two years from the date of transfer

The quantum of exemption that will be available will be as follows:

If the amount invested is more than or equal to the capital gain, the whole of the capital gain

If the amount invested is less than the capital gain then to the extent invested

You may, however, note that if the agricultural land transferred is situated in the specified area as provided in Section 2(14), the same will not be a capital asset and hence the gain will not be chargeable to tax on its transfer.

I sold a plot of land in Bangalore in May 2006. I purchased the land in August 2004. I invested the proceeds from the sale of land in another house. Can I claim exemption under Section 54? If the same cannot be claimed how is the tax to be calculated on the gain of Rs 7 lakh? What documents are to be enclosed as proof for such computation? I would also like to know if the changes made in the coming Budget would be effective from the financial year 2006-07 or 2007-08. — Kapil Kanungo

No exemption can be claimed by you under Section 54 or, for that matter, under any other section. The gain from sale of the land will be treated as short-term capital gains and taxed at the normal rates applicable to an individual. For computing the gain, the documents that need to be enclosed with the return are the document of purchase and the sale deed. The changes made by the Finance Bill, 2007 will normally be applicable from assessment year 2008-09 (previous year 2007-08) except where the amendment is made retrospectively from an earlier date or made effective specifically from a subsequent year.

My father and myself are assessees. In January 2006, my father transferred to me shares purchased by him in 1998 and 2003 without any consideration. I sold some of these shares in November 2006 and I now propose to sell the balance. Will the gain from the sale of these shares be treated as short-term capital gains? Will there be any tax on the gift by my father to me? — Arumugam Muthukumar

There will be no tax implications from the gift by your father to you, for in the first place the provisions of Section 56(1)(v) will not be attracted where the gift is in kind. The provision only seeks to tax a sum of money received without consideration. The provision also seeks to exclude from the ambit of taxability sums received from a relative, which will include the father of an individual. The gain on the sale of share by you will be treated as long-term capital gains. Section 2(42A) specifically provides that where a capital asset is received by way of gift and where the same is sold, the period of holding of the donor will also be taken into account in determining whether the gain is short or long term. In your case, your father and you have together held the shares for a period exceeding 12 months and therefore the gain will be long term.

Please refer to your reply in this column of January 28, 2007. You mentioned that Section 56(1)(v) treats a sum exceeding Rs 50,000 without consideration as income in the hands of the recipient. May I draw your attention to the fact that the amount should be Rs 25,000 and not Rs 50,000? Please clarify. — Arun Kumar Agarwal

The limit in excess of which the sum received without consideration is taxable in the hands of an individual or HUF is now Rs 50,000 per annum. In this connection, you may refer to the Taxation Laws (Amendment Act) 2006, which received the assent of the President on July 13, 2006. The Amendment Act has amended Section 56(1)(v) to make the limit Rs 50,000 per annum.

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