The Hindu Business Line : Tax relief on interest from accident tribunal

I am a widow aged 40 years. My husband passed away in a road accident in 2001. In 2007, Motor Accidents Claim Tribunal awarded me a compensation of Rs 7.22 lakh along with an interest of Rs 3,28,920. The insurance company issued a TDS certificate for deducting Rs 33,880 on the interest payment. The interest belongs to the period 31.07.2001 to 28.02.2008.

As the award was issued in 2007-08, tax was deducted at source on the interest in 2007-08. I have no other income other than the interest from the compensation deposited.

Will I be able to claim refund or relief in respect of the tax deducted at source of Rs 33,880 on the basis that the interest received is for 78 months since 31.07.2001 and that if the same is bifurcated the proportionate interest would be much lesser than the maximum amount not chargeable to tax in each of the years from 31.07.2001. — Meera Raj

You would be well within your rights in seeking to spread the interest over the period to which it relates. The interest belonging to the various years would get assessed in the respective years whereby your income may be lesser than the maximum amount not chargeable to tax. In such a case, you would also be entitled to refund in respect of the tax deducted at source.

I have contributed Rs 10,000 each for three years from 2005 in Bajaj Allianz Insurance Easy Gain Pension Scheme. Now after completion of three years I have the option of surrendering all the units and exiting. The fund value is about Rs 44,000 now.

I understand that if income-tax benefit for the original contributions has been claimed u/s 80CCC, then the whole amount of the surrender value, i.e. Rs 44,000, will be my taxable income if I exit from the scheme now. Is this correct? What would be my tax liability if I had claimed the benefit u/s 80C? — V. Subramani

The sum received on exit from the scheme will be taxed in your hands as income. Section 80CCC(2) provides that if the amounts standing to the credit to the fund are received on surrender or as pension, the same will be taxed in the year the withdrawal is made or pension is received.

You may note that in respect of the sums received out of investments made for the purpose of claim of deduction u/s 80C, the same will not apply. In such cases it may be only the excess over the sum invested that would be taxable. The return of the sum invested will not be taxable like in case of an amount received from an investment towards the pension fund which qualified for deduction u/s 80CCC and where such deduction has been claimed.

I jointly own a house property with my wife. We availed a loan for construction of the house. The interest on the above loan amounted to Rs 3,08,000 for 2007-08 which was paid by us equally.

I understand that Rs 1,50,000 is eligible for deduction u/s 24 in respect of interest payments for a self-occupied property. Are we eligible for a deduction u/s 24 of Rs 1,50,000 each or Rs 75,000 each? — S.S. Binulal

You and your wife will be eligible to claim a deduction of Rs 1,50,000 each though you are the joint owners of the self-occupied property.

I had taken a housing loan a few years ago and had pre-closed it by taking a loan from my father. I am repaying my father the principal along with interest. Will I be able to claim tax benefits in respect of the principal and interest payment on the loan taken from my father? — Neeraj K.R. Sharma

The interest paid to your father will be eligible for the claim of deduction u/s 24 in computing the income from house property. The deduction u/s 80C in respect of the principal repayment of the housing loan will however not be available to you as to claim the deduction u/s 80C, it is necessary that the loan must have been taken and the repayment made to certain specified institutions.

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

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