The Hindu Business Line : TDS woes of a senior citizen

I am a retired professor and a senior citizen. I want to invest Rs 3 lakh out of my retirement benefits in a bank FD offering interest of 10.5 per cent per annum. The annual interest is Rs 32,500. I understand that tax will not be deducted at source if the interest does not exceed Rs 10,000. In my case will tax be deducted at source on Rs 22,500, i.e. Rs 32,500–Rs 10,000, or on the entire interest of Rs 32,500. — Prof Narendula W.

Tax will have to be deducted at source on the interest of Rs 32,500 and not merely on the excess over Rs 10,000, i.e. on Rs 22,500. Section 194A, which provides for tax to be deducted at source on interest other than interest on securities, provides that no tax needs to be deducted at source where the interest does not exceed Rs 10,000 paid by a bank, does not provide that it is only on the excess over the said Rs 10,000 that tax will have to be deducted at source.

Once the interest from the bank exceeds Rs 10,000, tax will have to be deducted on the of interest.

Is son-in-law included in the definition of relatives for the purpose of taxability of gifts? — Anonymous

There will be no tax implications on a gift made by you to your son-in-law or if you receive a gift from your son-in-law. Though section 56 seeks to bring anything above Rs 50,000 per annum received without consideration to tax in the hands of the recipient, the said section also excludes sums received from a relative. The term relative for the purpose of this section is defined also to include the father-in-law as also the son-in-law.

I own three houses of which houses one and two were let out and house three is self-occupied. House two, which was let out, has been given to a builder for construction of flats. The builder would be giving in exchange a new residential flat in the said complex.

How is the consideration computed? Will I be eligible for an exemption under section 54 by treating the amount invested in the new flat an investment for this purpose? — K.V.R. Acharya

The consideration for the sale of undivided share in land representing the builder’s share in such land which would be transferred to the builder or his nominees would be the cost of construction of the residential flat allotted to you.

The capital gain should be computed by taking the full consideration on the transfer of undivided share in land to be such cost of construction of the residential flat allotted to you. You can avail exemption under section 54 on the re-investment in the new flat allotted to you by the builder as a result of the agreement entered by you with the builder.

I have a house and I have let it out to my employer under self-leasing scheme of the Government of India. My son is working in another company and we are proposing to buy a flat jointly in our names. We have taken a housing loan for the purchase of the flat and the EMI will be paid jointly by us.

I understand that it will be possible for both of us to claim income-tax benefits on the payment of interest and principal repayment towards the housing loan. But as I am owning a house and earning rent from it, will it be possible for me to claim the tax benefits on the housing loan that has been taken jointly by me with my son for purchase of a new flat? — O.M. Vasudevan

There is no prohibition on your claiming the deduction u/s 24, in respect of the interest paid on the housing loan, in computing your income from house property. You can also claim deduction u/s 80C in respect of the principal repayment of the housing loan. The fact that you own a house will not affect your claim for deduction under these sections.

I am an employee of a public sector undertaking and is under suspension. I am being paid subsistence allowances from which along with other eligible deductions profession tax is also being deducted. Is profession tax deductible from subsistence allowance? — Biswanath Mukhopadhyay

You can claim the profession tax as a deduction from the subsistence allowance. The sum received by you as subsistence allowance will be taxable under the head salary as though you are under suspension, the public sector undertaking still continues to be your employer and this sum received by you will therefore represent only the salary payable to you for the period when you are under suspension.

Profession tax can be claimed as deduction against income under the head salaries u/s 16(iii).

My son-in-law is a doctor working in Australia since April 2008. He has income from house property and interest income from bank deposits in India.

The premium towards his life insurance policies is paid out of his interest income and maturity proceeds of bonds, LIC policies, etc. Will his income earned in Australia be chargeable to tax in India? What will be the tax implications if he transfers funds from Australia to his bank account in India? — Vinod Gupta

It is understood that your son-in-law has been in Australia continuously from April 2008 and will not be in India for a period exceeding 182 days. If this were so, your son-in-law would be a non-resident within the meaning of section 6 of the Income Tax Act.

That being so, the income earned by him in Australia will not be chargeable to tax in India since u/s 5 of the Income Tax Act, income accruing or arising outside India will not fall within the scope of total income in case of a non-resident.

There will also be no tax implications when he transfers funds from his bank account in Australia to his bank account in India. The income earned in India would however be chargeable to tax in India.

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