The Hindu Business Line : Father’s loan for daughter’s education

Interest on loan taken for higher education of an individual or his relative can be claimed as a deduction under Section 80E. For the claim of deduction under Section 80E the following conditions need to be fulfilled:

The loan is taken from a financial institution or a charitable institution notified by the Central Government under Section 10(23C) or an institution referred to in Section 80G(2)(a) and the loan is taken for the purpose of pursuing the higher education of the individual or his relative.

Higher education for this purpose means the full time studies for any graduate or post graduate course in Engineering, Medicine, Management or for post graduate course in Applied Sciences or Pure Sciences including Mathematics and Statistics.

The term relative would mean the spouse and children of the individual.

The deduction under this Section would be available in respect of the interest on the loan taken for eight assessment years beginning from the assessment year in which the interest is paid.

I am a Gujarat State Government employee drawing a salary of Rs 4,00,000.

In the month of June, I and my wife undertook Kailas Manasarovar Yatra organised by the Ministry of External Affairs.

Am I eligible for deduction under Section 80C or under any other Sections of Income Tax Act on the expenditure met by me for such religious yatra? —G.B. Modha

No deduction can be claimed by you under Section 80C in respect of such travel.

If you are in receipt of leave travel concession, you may however be entitled to claim exemption under Section 10(5) subject to the limits and conditions stipulated by that Section.

I am a salaried person and I made a short term capital gain of around Rs 12,500 by selling the shares. Can I get any tax benefit on account of the securities transaction tax paid by me?— Manish

If the gain is a short term capital gain and is taxed at the rates specified under Section 111A, no further benefit can be claimed by you in respect of the securities transaction tax paid on purchase and sale of shares.

The rate of tax provided for under Section 111A in respect of short-term capital gains is 10 per cent (as increased by the appropriate surcharge and additional surcharge).

I am a salaried employee and I had purchased a plot of land admeasuring 2,700 sq ft in April 1994 at Oragadam, Tamil Nadu for Rs 10,000.

I have been asked to surrender the said land to the District Collector of Kanchipuram, since the Government of Tamil Nadu is setting up a SEZ in that area. The compensation to be paid by the State Government for my plot is about Rs 3 lakh. Am I liable to pay capital gains tax and if so, what would be my tax liability?

Can I get any exemption by investing in RBI bonds or other Government Securities? —

S.R. Narayanan

Capital gains tax will be chargeable on the gain arising from the compulsory acquisition of land by the Government. The capital gains will be computed by reducing from the full value of consideration of Rs 3 lakh, the indexed cost of acquisition which in the present case would be Rs 21,274.

The indexed cost of acquisition is arrived at by multiplying the cost of acquisition by the cost inflation index of the financial year of transfer i.e. of the financial year 2007-08 which is 551 and dividing the result by the cost inflation index of the financial year of acquisition i.e. of the financial year 1994-95 which is 259.

The long-term capital gains would therefore be Rs 2,78,726 and the tax on the same would be Rs 55,745 as increased by the appropriate surcharge or additional surcharge.

No exemption can be claimed in investing in the bonds of the RBI or Government securities.

Exemption may be claimed by investing in the bonds of the National Highways Authority of India or the Rural Electrification Corporation which are not redeemable within a period of three years.

The investment in such bonds has to be within six months from the date of transfer.

I availed a loan from a nationalised bank in my wife’s name for pursuing her MS Degree in the US.

However, I am paying the interest on the said loan taken in the name of my wife. Is the interest paid on such loan is allowable as deduction from my salary income. — M. Eashwaran

The interest on the said loan can be claimed as a deduction subject to satisfying the conditions in Section 80E which are stated elsewhere in this column.

In one of your earlier replies, you said that close family members can give gift without any consideration to each other free of tax.

Can a Karta or a co-parcener gift to the HUF without involving any tax implications on either side? — Pajwani

Any sum received without consideration is treated as income under Section 56(2)(v) and is to be charged to tax under the head income from other sources where the sum exceeds Rs 50,000 in a previous year.

Exceptions are provided in respect of sums received from certain relatives and in certain other circumstances such as at the time of marriage.

All these exceptions are applicable only in case of individuals and there can be no exclusion in respect of sums received by a HUF.

It may, however, also be noted that when a co-parcener gives his individual property to the HUF, it will not be a case of gift but will be a case of impressing or blending one’s individual property with that of the HUF and on this basis it may be possible to take a view that there will be no tax implications on such impressing or blending.

It may also be noted that the income from such assets impressed with that of the HUF will be clubbed in the hands of the transferor by virtue of Section 64(2) of the Act.

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