The Hindu Business Line : TDS worry before dollars go to our man in Saudi

OURS is an Indian company. A citizen of India has been deputed by our company to Saudi Arabia whose salary is remitted by the company in US dollars to Saudi. Is our company required to deduct tax at source?

R. Srinivasa Rao, e-mail

The liability to Indian income-tax in respect of foreign income would depend upon one's residential status. If one is a non-resident, his foreign income would be outside the pale of Indian taxation unless the income in question is deemed to accrue or arise in India. But the employer is not obliged to find out the residential status of his employees. The onus rather is on the employee. Thus he has to obtain, in terms of Section 197(1), a certificate from his assessing officer (AO), authorising payment of salary without deduction of tax at source (circular 147 dated October 28, 1974).

Interest during construction

I TOOK a loan of Rs 7,10,000 for purchase of land in 2002 and during the financial year 2002-2003 paid interest of Rs 60,000. During 2003-2004 I paid Rs 57,000 as interest on this loan. I took a loan of Rs 1,40,000 during the course of 2003-2004 for construction and paid interest of Rs 22,000 on this loan in 2003-2004. How much interest is deductible from income from house property?

Ashish Kumar Mandal, e-mail

Interest during the construction period is deductible over a period of five previous years once the construction is over. While Rs 60,000 of 2002-2003 relates to the construction period, you have not given the break up for Rs 57,000 as to how much out of this is towards construction period. Be that as it may, assuming the entire Rs 57,000 to be relating to the construction period, the aggregate interest during construction period works out to Rs 1,17,000. For the previous year 2003-2004, you would get as deduction one-fifth of this plus the interest of Rs 22,000 on the fresh loan.

US vs China

THE US is reportedly putting pressure on China to devalue its currency, Renminbi. What are the motives?

T. Mukundan, Pudesseri

The US is running a huge trade deficit with China. In simple terms, the US imports a great deal more from China than it exports to China. With an undervalued currency vis-à-vis the US dollar, the Chinese Government is able to encourage exports to the US — exporters get more Chinese currency by selling each dollar. The US wants to stop this. This explains the relentless pressure it is putting on China.

Her land, my loan

I AM constructing a house. The land is registered in my wife's name. I have taken a home loan from a bank and my spouse is a co-applicant for the said loan.

Since my wife is neither an employee nor an assessee of income-tax, the repayment will be made only out of my salary income.

In this case, please enlighten me as to whether I am eligible to get the income-tax benefit for principal repayment and interest?

M Subramanian, e-mail

For getting tax rebate in respect of housing loan under Section 88, the house property in question must be the one assessable to tax under `income from house property'.

Therefore, if the house is not owned by you at least partially, you would not get the rebate under Section 88 even if you have paid the instalments to the bank.

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

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