The Hindu Business Line : A senior citizen's TDS worry

I am 62 and a retired headmaster of Kendriya Vidyalaya Sangathan. I have invested my terminal benefits of Rs 13 lakh under the Senior Citizen Savings Scheme 2004, with the Head Post Office, Berhampur, Orissa. The interest of the above deposit comes to Rs 1,17,000 per annum. When I wanted to withdraw the quarterly interest amount from the post office, the authorities insisted on tax deduction at source. Though I submitted Form 15G, as envisaged vide L.No. F.No.02/8/2005- NS II dated June 23, 2006, to them they insisted on TDS. Please clarify whether the postal authorities are bound to deduct the tax at source.

Bauri Bandhi Pathi, Berampore

The postmaster is correct because as per the said CBDT circular two conditions should be satisfied. Both the interest as well as your total income should be below the tax-free limit whereas by your own admission, the interest would be more than Rs 1 lakh, which is the tax-free amount in your case.

Please remember the CBDT has relented only for the purpose of non-deduction of TDS in favour of those who are strictly not senior citizens. It has not relented for the purpose of income-tax exemption limit — the exemption limit of Rs 1.85 lakh is applicable only to senior citizens who were at any time during the previous year 65 years of age or more. I am afraid you cannot ward off the TDS on interest of Rs 1.17 lakh, which is well above the tax-free limit of Rs 1 lakh.

Loss set-off

A company has two units. One is a normal unit and the other an export-oriented unit (EOU). Can the loss of EOU be set off against the profit of the ordinary unit?

Mukesh Sachania, email

There was a prohibition on loss from an EOU being set off against the normal business income of the assessee till the assessment year 2000-2001. This ban, however, has been lifted for the subsequent periods. So the answer to your query would depend upon the year in which the loss was incurred.

Preliminary expenses

I would like to know about the tax treatment of preliminary expenses.

Sachin Singhal, email

Subject to a ceiling of 5 per cent of the project cost or at the option of an Indian company 5 per cent of the capital employed, the preliminary expenses can be written off under Section 35D over a period of five years.

(ASK! Send in your queries to ask@thehindu.co.in.)

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