The Hindu Business Line : Double pension tax liability

My mother is a retired government employee and is drawing her superannuation pension. After the death of my father, who was also a government employee, my mother is receiving the family pension.

Can my mother continue to draw both the pensions and does she have to club both the incomes and file her income tax return? — Oscar P.

Your mother’s pension as well as the pension received by her after the death of your father, which is by way of family pension will both be her income and will have to be included as such in her income tax return.

You may note that your mother’s pension, which is received as a result of her being a retired government employee will be taxable in her hands as income under the head ‘Salaries’ while the income received by way of family pension will be subject to tax in her hands as ‘Income from Other Sources.’

The family pension received by her will be eligible for a deduction under Section 57, which would be Rs 15,000 or one-third of such income, whichever is lesser.

My father purchased a flat at Mumbai about a year-and-a-half ago, which he has gifted it to me.

What would be treated as the cost of acquisition of the property in my hands in the event of my deciding to sell the property?

On the contrary, if the property is gifted by me to my minor children, what will be treated as the cost of acquisition in their hands? — Praveen Singh

Section 49 specifically provides that the cost of acquisition in case of a property acquired by way of gift will be taken as the cost to the previous owner.

In your case, the cost of acquisition would, therefore, be treated as the cost incurred by your father for acquiring the property.

This Section also provides that if the previous owner, from whom the assessee acquired the property, had also acquired it by way of gift etc, the cost of acquisition would be treated as the cost to such previous owner, who acquired it in any of the modes, otherwise than by way of a gift or other modes specified in Section 49.

This being so, if you gift the property to your minor children, the cost of acquisition to them at the time of the sale of the property will be taken as the cost for which your father acquired the property.

I am an officer in a nationalised bank. I had taken a housing loan from my employer bank in 1988 for purchase of an apartment at Chennai.

I had also taken a loan from the Employee Co-operative Housing Bank for this purpose.

I have taken another housing loan form LIC Housing Finance to purchase another apartment at Tirupati.

Will I be able to claim the deduction under Section 80C in respect of the principal repayment of this housing loan?

Out of the two apartments, one of them is self-occupied and the other is let out. I would be including the rent from the property, which is let out, as my income.

Will I be able to claim a deduction in respect of all the three loans, both in respect of interest and principal?

If so, what is the limit for the same? You may note that the loan from the LIC Housing Finance has been taken in the joint name of my son and myself, so as to be able to avail the higher limit for bank finance as also a long period for repayment of the loan.

It may further be noted that though the loan is in joint names, the apartment is purchased only in my name. — R. Ravi

The deduction under Section 80C in respect of the principal repayment on the loan and also the interest on the loan under Section 24 can be claimed in respect of all the three loans.

It is understood that the first two loans, i.e. the loan from your employer and the Employee Co-operative Housing Bank are taken for acquiring the first property and that the loan from LIC Housing Finance is taken for acquiring the second property.

The principle repayment in respect of the loan taken from your employer, Employee Co-operative Housing Bank and the loan taken from LIC Housing Finance will qualify for a deduction under Section 80C, subject to the limits in that Section.

It may be noted that the maximum amount of deduction under Section 80C is a sum of Rs 1 lakh and also that Section 80C allows a deduction in respect of certain investments and payments, which also includes the principal repayment of a housing loan.

The interest on loans taken for acquiring the let out property will be allowed as a deduction without any ceiling limit, while the interest on loan taken for acquiring the self-occupied property will be allowed as a deduction subject to the limits in Section 24. The maximum amount of deduction under Section 24 is Rs 30,000; but, if the loan is taken on or after April 1, 1999, and if the acquisition or construction is completed within three years from the end of the financial year in which the loan is taken, the deduction will be available up to a maximum limit of Rs 1.5 lakh.

I am a software engineer. I was on deputation to the US from October 2, 2005, to January 14, 2008. My employer pays a part of the salary in India and a part is paid into my US bank account during the period of deputation.

During the financial year 2007-08, as mentioned earlier, I have been in India after January 14, 2008.

I am given to understand that the salary for the financial year will be taxable in India. The said salary is also taxable in the US. What is the recourse available to me? — Anitha Bhavaraju

Apparently, it appears that you are a resident in India in accordance with Section 6 of the Income Tax Act.

You may now have to determine your residence in accordance with the Double Taxation Avoidance Agreement between India and the US.

Article 4 of the said agreement is relevant for this purpose. It is most likely that as per this Article, you would be resident in India for the purposes of the Double Taxation Avoidance Agreement.

If this were so, you can claim credit for the tax paid in the US, in India at the lower of the rates of tax applicable to the two countries in respect of the doubly-taxed income.

It may, therefore, be possible for you to claim credit for the tax paid in the US, in India, if you are a resident in India as per Article 4 of the Double Taxation Avoidance Agreement.

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