The Hindu Business Line : Joint account interest in income-tax return

I resigned from the services of a bank and I deposited the terminal benefits of Rs 12 lakh in the Post Office Senior Citizens' Scheme in the joint names of my husband who is a senior citizen and myself (53 years) to earn 9 per cent interest. I wish to show the interest income in my I-T return, as the funds are mine and as he is earning interest in the Post Office MIS A/c from his retirement benefits. Am I correct in showing the interest as my income? I am also confused about the TDS certificate, which will be issued by the PO in our joint names. Kindly advise.

Poornima Shenoy, Bangalore

You should have in your application specified the share of yourself and your husband. A token, say, 5 per cent share could have been attributed to your husband so as to be in sync with your claim of this being your joint property, which a joint account admittedly is.

In that case the post office would be obliged to comply with your wishes as to the treatment of income substantially in your hands. This is the sum and substance of Circular No. 256 of May 29, 1979, that has a direct bearing on your query.

Deductions on rent, EMI

I am employed in a public limited company and for the first six months of the financial year 2006-07, I was living in a rented apartment and also made EMI (equated monthly instalment) payments during that period for the apartment purchased in the beginning of the FY. How will the rent and EMIs paid by me be treated from the income-tax perspective? Can I claim both these deductions? Also, please let me know if I can claim 100 per cent exemption of the EMI paid during the period (first six months — apartment not being let out)? I did not occupy the apartment and was actually living on rent.

Mukul, email

You are presumably drawing house rent allowance (HRA). In that case, for the first six months, the salary for this period, which is basic plus dearness allowance if it counts for your retirement benefits, must be ascertained. The least of the three, that is, actual HRA for this period, 50/40 per cent of your salary according as you live in one of the four major cities or elsewhere, and excess of rent paid over 10 per cent of your salary for the above period is exempt from tax. The HRA for the second half of the year is fully taxable because you have not paid any house rent for this period.

The EMIs paid have to be broken into principal and interest. The principal qualifies for deduction from your gross total income along with various specified savings such as contribution to recognised provident fund, public provident fund, national savings certificates, tuition fees of your children, etc., subject to a ceiling of Rs 1 lakh. Exemption for HRA has got nothing to do with deduction under Section 80C of such principal. The house that you have acquired remained vacant for the first six months, after which presumably you have occupied yourself. The exemption on par with exemption for one self-occupied house unfortunately would not be available because evidently the house is in the same city where you are working and the reason for non-occupation was personal and not employment.

In the event, the annual value — read market value — of this house for this period would be ascertained. But you can deduct the interest subject to a maximum of Rs 1.50 lakh against it assuming you have fulfilled the prescribed conditions for this enhanced deduction, which otherwise is subject to a ceiling of Rs 30,000. This may well give rise to a loss, which you can set off against your salary income.

Tax on scrap?

Please tell me whether I have to collect tax on sale of scrap?

S. Suresh Babu, email

As per Section 206C, you are obliged to collect tax at the rate of 1 per cent plus surcharge and education cess of 2 per cent on the aggregate of such tax plus surcharge at the time of debiting the buyer's account or receiving amount on such sale, whichever is earlier. You should not collect tax as above should the buyer give a declaration in Form 27C that the scrap he is buying is for further manufacturing or processing and not for trading purposes.

The tax collected under this section must be deposited with the Government within a week from the end of the month in which it was collected or should have been collected.

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

http://MentorQA.blogspot.com

S. Murlidharan

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