The Hindu Business Line : Leave, the key to LTC exemption

I get Leave Travel Concession from my employer. My father and mother have undertaken a travel and I have furnished their tickets to my employer in claiming LTC. I have however not done any travel during the year. Will I be eligible to claim the exemption in respect of the expenditure on travel incurred by my parents? — Samir Ambavi

You may not be able to claim the exemption under Section.10(5) read with Rule 2B.

Section 10(5) permits the exemption to be claimed where the employee is in receipt of LTC and where expenditure is incurred by him on travel for himself and his family after proceeding on leave.

Since you have not gone on leave, the exemption under Section10(5) will not be available to you.

I am a Central Government employee. My husband was also one. After the death of my husband I get a family pension. Will I be able to get any deduction in respect of the family pension?

Under which head will the family pension be taxed? I continue to draw salary from the Central Government. — S. Jayalakshmi

The family pension that you receive will be taxable in your hands under the head "Income from other sources". You can claim deduction in respect of the same under Section.57(iia). The deduction that can be claimed will be the lower of one-third of such pension or Rs15,000. The fact that you are in receipt of salary as an employee of the Central Government will not make a difference.

I am employed in a public sector undertaking. I live with my guardian in Mumbai. I am in receipt of House Rent Allowance from my employer.

To claim exemption under Section 10(13A) in respect of the HRA, is it mandatory for me to submit house rent receipts to my employer to be taken into account in deducting the tax at source. I am informed that if the rent paid is up to Rs 3,000 per month, no receipt be produced. Is this correct? — Vijay

You are right in being informed that no rent receipt needs to be produced in certain cases to the employer.

The Board, in Paragraph 5.2-(9) of its Circular No.9/2003 dated 18.11.2003, has clarified that though proof needs to be given by an employee to his employer of the rent paid before the employer can take the same into consideration in computing the exemption under Section.10(13A) towards HRA, the same need not be insisted upon by the employer where the employees draw HRA of up to Rs 3,000 per month.

But the Board in this Circular also clarified that this concession is only for the purpose of tax deduction at source and in the regular assessment of the employee the Assessing Officer may make such enquiries as he deems fit to satisfy himself about the actual expenditure. If you are not actually expending the sum as rent, you would be well advised not to make any claim in respect of the exemption for the purpose of tax deduction at source or in your return.

One of my friends has received Rs 9,50,000 from her former husband following an agreement to live apart.

She is also divorced from him. What will be the tax treatment in respect of the sum? What will be the tax treatment if the sum is received after the divorce? — Arun

In either case, the sum will not be taxable in the hands of your friend.

The sum received in connection with an agreement to live apart by the wife from the husband whether before or after the divorce will not bear the character of income as defined in the Income-Tax Act and will be a capital receipt not chargeable to tax.

My father retired in November 1992. He had made investments in NSS '87. He received Rs 88,825 in January 2001 on their maturity and reinvested the proceeds in the Post Office Monthly Income Scheme.

After six years, he has received a communication from the Postal Department requiring him to remit Rs 17,765 to the post office towards tax that was not deducted at source on redemption of NSS '87.

Is the Postal Department justified in its demand? — N. Ravichandran

Apparently the Postal Department is not justified in requiring your father to remit the TDS, that it failed to deduct in 2001.

Such a claim made by the Postal Department has no sanction of law and cannot be insisted on by the postal authorities.

I sold a property within one year of acquiring it. The sale price is Rs 17 lakh and the capital gain is Rs 6,88,600.

I invested Rs 15 lakh in a house property within two weeks of sale of the first property and plan to invest some amount in a capital gains account scheme.

Will I be entitled to an exemption in respect of the capital gains? — Vijay Kulkarni

You cannot claim any exemption on the investment in the house property or in respect of the investment you propose to make in the capital gains account scheme.

The exemption which is available on sale of a capital asset not being a house property and on reinvestment in a house property under Section.54F or on sale of capital asset being a house property and on reinvestment in a house property under Section.54 is only where the asset transferred is a long-term capital asset.

In your case since the capital asset transferred is a short-term capital asset, that is, held for three years or less, no exemption can be availed of.

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