The Hindu Business Line : Hop and the LTA is skipped

I work with a public sector bank in Mumbai as a senior officer. In October 2006, I used the LTA for a trip from Mumbai to Singapore via Delhi and back with my other three family members. The cost of the ticket was Rs 19,000.

My bank reimbursed the cost of the ticket from Mumbai to Delhi as part of the LTA. But it did not allow me the exemption under Section 10(5) in respect of the travel even from Mumbai to Delhi in computing the Tax Deducted at Source.

It said that the benefit of exemption under Section 10(5) is not available to me as the tickets are not sector-wise, that is, Mumbai-Delhi, Delhi-Singapore and so on. Is the view of the bank correct or will I be able to claim the exemption while filing my return of income? — A. K. Sahu

To claim the exemption under Section .10(5) it is necessary that the person should proceed on leave to any place in India. You have not proceeded on leave to a place in India, but just stopped over in Delhi.

Thus, the benefit of exemption under Section 10(5) will not be available to you. The fact that you touched Delhi en route to Singapore cannot entitle you to the exemption under Section 10(5).

My father owns a plot of land. He is a retired person. I propose to take a housing loan and construct a house on the plot.

Can I get the tax benefits on the interest and principal that I would pay on the housing loan? — Pradeep Bhat

If in the instant case it can be taken that you are the owner of the house property, you can claim the deduction in respect of interest.

The same will be the situation in respect of deduction under Section 80C as well, in respect of the principal repayment of the housing loan.

At this stage it may be mentioned that the law recognises dual ownership in respect of immovable property i.e. the ownership of land by one person and that of building by another.

My employer company gives me Leave Travel Assistance along with my monthly salary. Will I be eligible to claim exemption as the LTA is not paid annually but monthly? — Borude

The exemption under Section .10(5) in respect of LTA should be available to you and it will not make a difference whether the LTA is paid to you on a monthly basis or on an annualised basis.

I borrowed Rs 2 lakh from a bank as a personal loan for my sister's marriage. But the marriage got postponed by a year. In the interim I invested Rs 1.50 lakh of loan in equity shares.

I have now sold the shares. Will I be able to claim the interest on the personal loan as a deduction in computing the capital gains? — Jothiprakash Sahoo

While you cannot claim the entire interest as a deduction, the interest proportionate to Rs 1.50 lakh attributable to the period from the date of investment to the date of sale of the shares can be claimed as deduction by adding it as a part of the cost of acquisition.

I inherited a piece of agricultural land which was purchased by my grandfather in 1970. The land is within 8 km from a municipal limit.

Will I be liable for capital gains tax on the sale of the land? If yes, how will the capital gains be computed? Will it be possible to make an investment to avoid capital gains? Will any exemption be available on reinvestment in another plot? — Mandeep Gill

You will be liable for capital gains tax on the sale as the land, though classified agricultural, is within 8 km from municipal limits and will be treated as a capital asset under Section 2(14) of the Act.

The capital gains will be computed by subtracting from the full value of consideration the expenditure incurred wholly and exclusively in connection with the transfer, the indexed cost of acquisition and the indexed cost of improvement if any.

Since the property was acquired by your grandfather and inherited by you, your cost of acquisition would be the cost at which your grandfather acquired the land.

You can get an exemption on the capital gains by investing in bonds of the Rural Electrification Corporation or the National Highways Authority of India.

You can also get an exemption on the capital gains by reinvesting in a residential house. In such a case the cost of acquisition of the land can also be taken as reinvestment in the residential house.

Reinvestment only in another plot will not entitle you to claim any exemption except if you construct a residential house on it.

My mother, my sister and I inherited a parcel of agricultural land. My father purchased this land measuring 0.70 acres for Rs 28,000 in March 1989.

We now propose to sell this land for Rs 56 lakh. This land is located 10 km from a town. Under the personal law applicable to us, the proceeds on sale of the land are to be shared equally among myself, my mother and sister. What will be the tax implications in our hands? Please note that I am a tax assessee in the 30 per cent slab, my mother a pensioner is not assessed to tax, and my sister an NRI also is not assessed to tax. — Mohamed Sagheer

Your query does not indicate whether the agricultural land is one which will be classified as a capital asset under Section 2(14) or whether it would be outside the definition of the term capital asset.

If it were outside the meaning of the term capital asset, there will be no liability to tax on its sale. If it is within the meaning of the term capital asset, it would be chargeable to tax at 20per cent (as increased by the appropriate surcharge and additional surcharge) in the hands of all three of you. Your sister and mother can reduce the unexhausted portion of the basic exemption before computing the tax on the capital gains.

More Stories on : Income Tax | Income Tax | Tax Talk

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page