The Hindu Business Line : Fees eligible for deductions

Section 80-C of the Income Tax Act allows a deduction in respect of tuition fees (excluding any payment towards any development fees or donation or payment of a similar nature) whether at the time of admission or otherwise.

It can be seen that the exclusions are in respect of development fees or donations or payments of similar nature.

Since these are the only exclusions contemplated, can it be said that fees for games, magazines, stationery, parent-teachers association, staff benefit fund, gratuity fund and hostel will qualify for deduction.

In the same way, will computer fee, library fee, activity fee, exam fee and laboratory fee be eligible for the deduction? — Alok Mathur

As stated by you, what is specifically excluded from the ambit of the deduction is in respect of development fees or donations or payments of similar nature.

While these are specifically excluded it can be seen that what qualifies for the deduction is only fees which is in the nature of tuition fees.

Out of the various items stated by you, the fee paid towards laboratory and computer is certainly in the nature of tuition fees and therefore should qualify for the deduction.

The other items stated by you, do not appear to be in the nature of tuition fees and hence would not qualify for the deduction.

In your reply through this column, you stated that the clubbing provisions would not be applicable for the capital gains from the sale of shares in the hands of wife even though the money was lent to her by her husband.

Would the same be applicable even for a flat purchased by my wife out of the loan advanced by me?

What kind of documentation is necessary for this purpose? — P.S. Gohil

The clubbing provisions in Section 64(1) will not apply even in your case where a loan has been given by you to your wife for purchase of the flat.

Section 64(1) of the Act contemplates of including the income of one spouse in the hands of the other where assets are transferred by one spouse to the other otherwise than for adequate consideration or in connection with an agreement to live apart.

In a case where the asset or money is not transferred but is only given as a loan, this provision cannot be made applicable.

Any documentation even in terms of a confirmation of the loan as and when required would suffice to show that the monies have not been given as a gift or for inadequate consideration but only as a loan.

I have received a sum of Rs 42,500 from the Public Works Department, Government of Karnataka, as compensation for damage of my building at the time of work carried out for widening the road.

Is this sum taxable? — Ram Gopal

From the facts given by you, it does not appear that any part of the land or building is taken over by the Government.

If that were so the sum received by you would only be a capital receipt and would not be chargeable to tax.

If on the other hand any part of the land owned by you was taken over by the Government the sum received by you would be chargeable to tax under the head capital gains.

I currently hold some shares in a demat account opened by my e-broker. I have been holding these shares for more than one year.

I have recently opened another demat account as I am now operating through a different e-broker.

If I transfer the shares from the old demat account to the new demat account, will I still get the benefit of treating these shares as long-term capital assets? — Suresh

On the sale of the shares, which have been transferred from your old demat account to your new demat account, the gain will still be treated as a long-term capital gain.

The fact that you have had these shares transferred will not affect your claim on treating the gain as long term.

The period for which the shares were held in the previous demat account will also be taken into account in determining whether the gain is long term or short term.

I propose to sell a plot of land and purchase a new house. Will I be able to claim the tax benefit under Section 54F? — Jagmeet Sapra

Exemption can be claimed by you under Section 54F provided you satisfy all the conditions, which are required to be satisfied for the said claim. Section 54F allows an exemption on transfer a long-term capital asset not being a residential house and on reinvestment in a residential house.

An exemption is available under Section 54F in such circumstances provided the following conditions are fulfilled.

The assessee is an individual or HUF.

The gain arises from the transfer of a long-term capital asset not being a residential house.

The assessee does not within a period of 2 years purchase or 3 years construct any residential house other than the new house.

The assessee is not the owner of more than one residential house (other than the new asset) on the date of transfer of the original asset.

The quantum exempt will be on the following basis:

If the amount invested is more than or equal to the net consideration then the entire capital gain.

If the amount invested is less than the net consideration then the (amount invested) x (capital gain/net consideration).

The new Section 80E provides for claiming a deduction in respect of interest on loan taken for higher studies even where the loan is taken for the higher education of the spouse or children of an individual.

Will such deduction be available even where the loan was taken in earlier years? What is the time limit for which this deduction is available? — Mala Ram

Section 80E has been amended to provide that with effect from assessment year 2008-09, the deduction will be available in respect of the interest on loan taken for the purpose of the higher education of the individual or his relative and the term relative is defined to mean the spouse and children of the individual.

The deduction as such will extend to the interest on loan taken for the higher education of the relative of the individual as well with effect from assessment year 2008-09 but will be available in respect of interest on loans taken even earlier for this purpose.

This deduction is available for a maximum period of eight assessment years beginning from the year in which the interest is paid.

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