The Hindu Business Line : Why should the salaried file tax returns?

I don't understand why a salaried person should be required to file return since the employer in any case files a return of tax deducted during the year to the tax department setting out all the details required.

Yagyanarayanan, Madurai

In fact, a decade ago, for a brief interregnum there was no need for an assessee with a salary income up to a prescribed threshold and having no income from other sources except perhaps the interest that was in any case deductible under Section 80L to file a return.

In the run up to Budget 2006, there was a talk of reviving this arrangement. May be it would be implemented soon. I agree it is a waste of time for both the salaried person and the tax administration, which can sublimate its energies thus saved elsewhere — gunning after the hard-to-tax categories.

Receipts from demolished building

I owned a commercial building which was about 40 years old and in a dilapidated condition.

In June 2006 I demolished the building completely. I sold the waste building materials comprising building waste, iron, marble slabs, etc., for Rs. 5.5 lakh. Is this receipt taxable or not? One of my friends advised me to show it as a capital gain.

Is it taxable as a capital gain? If yes, can I claim the cost of building as the cost of acquisition, which is about Rs 40 lakh? I do not intend to use the plot in the near future for any other commercial purpose. Can you advise me on the taxability of this receipt?

Saurab Jain, Bangalore

Section 2(47) says transfer includes the extinguishments of any rights in a property.

I think you have, by this definition, sold the building for Rs 5.5 lakh and in the process have landed a huge long-term capital loss given the fact that the cost of the building can be indexed in the manner provided in Section 48.

You can use this loss to set off any long-term capital gains during this year or the subsequent eight years.

Education loan

I am told that if I take an education loan, I would get income-tax benefit only on the interest repaid. Why not on the principal?

Abishek Kumar Pahuja,

New Delhi

A very sensible question indeed. Earlier, there was no talk of principal or interest and the entire amount, subject to a cap of Rs 40,000, was allowed as a deduction from one's gross total income. There is no cap now. In other words, the interest paid during the eight years, including the initial year when the repayment starts, which is almost invariably after the education is over, would be fully deductible.

There seems to be no rationale however for ousting the principal component from the reckoning.

It may be that the idea of allowing only interest was to prop up the banking sector so that huge loans would be taken now that there is no cap on the amount of interest, whereas earlier the size of the loan would perhaps have been restricted to Rs 3.20 lakh, that is, eight times the annual cap.

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

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S. Murlidharan

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