The Hindu Business Line : Caught between a sticky tenant and a chucking company

I GAVE my house on rent to a company. Now I am caught in the crossfire — the employee to whom the house was given as rent-free accommodation by the company was fired. But he obstinately refuses to vacate the property.

I am driven to borrowing at exorbitant interest on the strength of my credit card for meeting my EMI commitments in the absence of rental income.

In the circumstances, what would be the annual value, will I get deduction for municipal tax and interest. What about TDS? It is not my fault that the rents have bunched to the dreaded figure of Rs 1.20 lakh and more warranting TDS in the unlikely event of arrears rent being paid. -- Kothandapani, e-mail

The rent not received would not be included in the annual value. You can by all means deduct municipal tax from whatever rent you have received irrespective of whether it gives rise to a positive or negative net annual value.

You would get deduction from the net annual value for interest embedded in EMIs but not on credit cards because borrowings made for paying EMIs is not one of the purposes countenanced by Section 24(b). Do not worry about TDS because you will get refund though I know that is like getting a consolation prize in a race.

Bond year

AN EMPLOYEE invested in Section 88 infrastructure bond on March 16, 2003. And the allotment was made on April 25. For which year should the tax rebate under Section 88 be granted — 2002-2003 or 2003-2004? -- K. Krishnama Raju, Bangalore

For the year 2002-2003 because the accent of Section 88 is on investment, that is outgo of funds, during the previous year.

Share trading

I TRADE in shares extensively through the ICICIdirect.com. I have made huge profits and sometimes incurred losses too. How should I pay income tax? -- T. T. Syamraj, e-mail

You are a dealer in shares. Therefore, your income from share trading will fall under Section 28, `Profits from business'.

While computing income under this head, you can claim all the revenue expenditure incurred for this business, such as rent, salary, electricity, telephone, Internet access charges, and so on. You can also claim depreciation on computer if you own one. You need have no pangs of guilt for not being able to make the grade as an investor entitling you to soft tax and tax shelters because, presumably you do not hold your investments for more than a year, a condition which must be satisfied for qualifying for these sops.

Share transfer

I HOLD shares in the demat form. I want to transfer some of these to my son. What are the tax consequences? -- T. N. Mohandas, e-mail

The system of gift tax is no longer in vogue.

But if your son happens to be a minor, his entire income, including the one from the shares so transferred by you will be added to your income unless your wife has got a greater income.

But if your son is a prodigy and earns income from exercise of his own skills, his income to that extent will not be so clubbed.

GAAP gap

INVARIABLY our corporates are asked to redraw their accounts in the light of the US GAAP. Is it not an insult to our GAAP? -- Kiran Komaravelu, e-mail

You must understand that a funding agency would like to make sure that the accounts before it can be relied upon.

If the US GAAP heightens their comfort levels, then we cannot possibly quarrel with them because we are the ones asking for their benevolence.

But we are getting our acts together gradually and soon we should be able to boast of GAAP that is compatible with the best.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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