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S. Murlidharan

I STARTED my PPF account in 1977, which would mature in 2008 after having been renewed in between.

The Finance Minister wants to usher in a regime of EET (exempt-exempt-taxed) from the existing one of EEE (exempt-exempt-exempt), which means on maturity or withdrawal the PPF amount will become taxable. Should this happen, will the entire amount deposited by me become taxable on withdrawal?

Amit Chakravarthy, e-mail

One of the cardinal principles of legislation is its prospectivity. The Supreme Court has held times out of number that a retrospective legislation cannot be made as to upset the vested rights of a person.

I am sure the Finance Minister would keep this time-tested principle in mind while ushering in the new regime. In which case you would escape with minor bruises.

Vacant house

I HAVE bought a house on the outskirts of Mumbai purely for investment purposes. I stay close to my office paying rent out of the HRA. I haven't dared to let out my house for the fear of not getting possession when required. What are the tax implications?

Chaitali, Mumbai

I am afraid this house of yours would be taxed as deemed to be let out property. Personal convenience does not beget you the exemption for the house under lock and key. That exemption is reserved for those unable to occupy their house due to employment or business reason.

The story would have been different had the house been at some other place away from your place of work.

PO planning

THE 0.1 per cent banking transactions tax perhaps is not applicable to withdrawals from post office savings bank account. Will people now make a beeline to post office? Is it fair to target harmless withdrawals when the Telgis and the Harshad Mehtas of the world are holding our system to ransom?

N. Sivasubramaniam, e-mail

Bravo! You seem to be an expert tax planner. You have already found a loophole in the law that deserves consignment to dustbin forthwith.

As to your justified anger and tirade against the system which targets the innocent and sitting ducks, all that I can say is successive finance ministers have failed miserably in widening the tax net.

Scams and NPAs do have the effect of ballooning the government handouts and, thus, strain our finances.

I couldn't agree with you more when you say that scamsters of all hues must be dealt with swiftly and severely.

Tax calc

MY total income is Rs 1.20 lakh. During the year I have paid Rs 58,000 towards repayment of the principal of a housing loan as well as interest on this loan to the tune of Rs 52,000.

My other savings in the avenues recognised by Section 88 are Rs 35,000. How much tax rebate would I get?

Anonymous

You are entitled to a tax rebate of 20 per cent on the prescribed investments under Section 88, which is Rs 35,000 + Rs 20,000, principal repayments being restricted to Rs 20,000.

This works out to Rs 11,000. Your tax liability on Rs 1.2 lakh is Rs 13,000. Thus, after rebate of Rs 11,000, the net liability is only Rs 2,000.

On this you must add an education cess of 2 per cent, which is Rs 40. Thus your total liability is Rs 2,040.

To N-E from Kerala

CAN one claim exemption under Section 10C — unit in the North-East — when its head-office is in Kerala? What is the definition of industrial undertaking for this purpose?

Nagabhushan Pai, e-mail

Yes. Section 10C tax-holiday is available to anyone irrespective of his residential status. The norms are simple. All that is provided is no industry should be set up by splitting an existing unit and second-hand machinery should not be more than 20 per cent of the total investment in machinery.

But this bar does not apply to imported machinery, which can even be 100 per cent.

Why not LIFO?

WHY does not the tax administration accept the LIFO method of stock valuation?

Nagabhushan Pai, e-mail

This is perhaps due to the misplaced suspicion that LIFO is a tax-evasion method because in a rising market charging the latest purchase to consumption would have the effect of depressing the profits.

But a moment's reflection would show that sooner than later the old purchases too would have to be charged to consumption. In short, like depreciation, valuation of inventories also gives rise only to timing and not permanent differences. This should sink into the tax administration.

Crossing the Rubicon

IS A person required to notify SEBI when he acquires a given number of shares?

Nagabhushan Pai, e-mail

Under the SEBI Takeover Regulations, the cut-off point is 5 per cent of the capital of the company.

Strictly speaking, at this stage the takeover code itself is not triggered because that happens once the Rubicon — 15 per cent — is crossed.

Dad's cash gift

WHAT are the income-tax consequences when a father gifts cash to his son?

Preeti Sundarran, e-mail

Since this is a gift from a relative, the son need not include this as his income.

However, the father will be obliged to include the income from such gifts in his taxable income in case the son happens to be a minor. This is popularly known as clubbing of income.

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

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