The Hindu Business Line : Is gift to daughter taxable?

I wish to gift my daughter, who is getting married, a car worth Rs 6 lakh . Can I use the money drawn from my provident fund for the marriage expenses? Will the gift attract tax? — Ambika

The car worth Rs 6 lakh gifted by you will not give rise to any tax implications either in your hands or in the hands of your daughter. You may note that a gift in kind will not attract tax in the hands of the recipient under Section 56(2)(v).

In any case, a gift to a daughter will not attract tax in the hands of your daughter, since there is a specific exclusion in Section 56(2)(v) of the Act on a gift made to a relative and further since the definition of the term ‘relative’ in the provision will also include the daughter of an individual.

There can be no prohibition on the use of money drawn from your PF account being used for the marriage expenses of your daughter.

I am earning a salary of Rs 12,800 and paying Rs 3,000 per month as house rent. How much deduction would I be able to get under section 80GG in respect of the rent paid by me? — Anshul

The deduction can be claimed under Section 80GG which will be the least of the following: Rs 2,000 per month or 25 per cent of adjusted total income or rent paid less 10 per cent of adjusted total income.

Adjusted total income for this purpose means the income after all deduction under chapter VI-A (Sections 80C to 80U) but before deduction under this Section. You may note that the deduction under Section 80GG can only be claimed where the assessee or spouse or minor child does not own a residential accommodation. You may also note that if you are in receipt of HRA, no deduction can be claimed under Section 80GG. You may, however, in a case where you are in receipt of HRA as part of your salary package be eligible for exemption under Section 10(13A) in respect of the rent paid.

I own two flats, one in Chennai and another in Mumbai. The flat at Chennai, bought from my retirement proceeds, is registered in our joint names (me and my wife) and my wife name is mentioned as the first name in the sale deed.

While the flat in Chennai is self-occupied, the one in Mumbai — which is registered in my name — is vacant. Will I have to pay tax on the notional rental value of the flat at Mumbai? Will interest earned from savings bank account be taxable? — K. Nagarajan

From the facts stated by you, it is clear that the property at Chennai is owned by you as the real owner, though it is registered jointly in the name of your wife and yourself.

It also appears that the flat at Mumbai is owned by you. You may note that the provisions of Section 23 only permit one house property to be treated as self-occupied even if there is more than one such property and the annual value of only one such property can be taken as NIL.

If there is more than one property, which is self occupied, only one of them will be treated as self occupied and thus the annual value of the same can be taken as NIL, while the other property or properties would be treated as deemed to have been let whereby the notional value of rent that the property would fetch had it been let will be treated as annual value and brought to charge, subject to the other deductions that could be claimed.

You may, however, note that if in your case both the properties are self occupied you have an option of treating any one of them as self occupied and the other as deemed to have been let.

In other words, you can choose to have the property, which will result in lower taxation to be treated as deemed to be let and the other to be treated as self-occupied. You may also note that if the property at Mumbai is vacant because of your inability to locate a proper tenant, these provisions will not apply.

The interest from SB account in a bank will be taxable as income from other sources.

I understand that the maximum amount that will qualify for deduction under Section 80-C is a sum of Rs 1 lakh. I also understand that contribution to a public provident fund would be eligible for the deduction under Section 80-C. While I believe that I can claim the entire deduction of Rs 1 lakh under Section 80-C by investing this entire sum in a public provident fund account, I am informed by the banks and post offices that they cannot accept a deposit beyond Rs 70,000. What is the correct position? — S. Venkateshan

You are right in your understanding that the maximum amount that will qualify for deduction under Section 80-C is a sum of Rs 1 lakh.

You may, however, have to note that the public provident fund scheme has been amended to provide that the maximum amount that can be contributed in a financial year in such an account is only a sum of Rs 70,000.

Therefore, though there is no restriction in Section 80-C as such on the contribution to PPF being a sum exceeding Rs 70,000, by virtue of the amendment to the PPF Scheme, no contribution in excess of Rs 70,000 can be made in such an account and therefore you will not be able to get the benefit under Section 80-C to the extent of Rs 1 lakh, only by way of contribution to PPF.

You may note that the banks and post offices are correct in refusing the deposit in excess of Rs 70,000 in such account.