The Hindu Business Line : Can I give my spouse a loan to reduce tax?

My wife, aged 56, is a homemaker and has no independent source of income. I am retired and am now 61, that is, not a senior citizen yet for the I-T department. I have invested in the senior citizens scheme, mutual funds and in bank deposits. I am having pension in addition.

The bank has deducted TDS on the bank fixed deposits and senior citizen deposits. Please let me know whether I can avoid clubbing of interest income on the fixed deposits by giving an interest-free loan from the fixed deposits amount to my homemaker wife, as the money in question is my retirement benefit and I have not to make any interest payment to anybody on that money.

Ranganathan, email

I am afraid not. While gifts in cash to relatives including spouse is not taxable as income in the hands of the donee, the donor has to reckon with the clubbing provisions contained Section 64, especially targeting income from assets transferred by an individual to his/her spouse sans consideration.

What you are toying with would squarely fall within the purview of Section 64 and, thus, the interest earned by her would bounce back to you.

Claiming LTA

Kindly clarify whether the tax legislation permits use of personal vehicle for a travel and claim thereof for seeking exemption of leave travel allowance received. The understanding by reading rule 2B is that the travel mode has to be necessarily through public transport, implying that use of own vehicles is not permitted.

TAP Krishnan, Coimbatore

Clause (ii) if rule 2B (1) permits private arrangements for those not wanting to be tied down to public transport but only if the journey could also have been performed by rail. In that case, the exemption would be restricted to the cost of journey by 1st class air-conditioned class in rail. Please note the clause talks of journey by any mode of transport other than air. This thaw can be latched on to by those making private arrangements. Even when the distance is not covered by train, private arrangements can be made because all that the next clause (iii) says is that in that case the exemption would either be restricted to what the public transporter charges for his first class tickets or what the railways would have charged for a similar distance for its first-class passengers. My short answer is the rules do not oust private journeys from the exemption regime.

EMI on housing loans

What are the implications of paying EMI and pre-EMI for housing loans?

Raman, email

The income-tax law doesn't in terms use these terms. These are the terms used by the financial world. The truth is both interest and the principal are eligible for tax benefits only when the house is complete i.e. capable of being assessed as income from house property.

There is one small grace though. The interest relatable to the period comprised in the previous years preceding the previous year in which the house is completed can be accumulated and claimed as a deduction in five equal installments spanning five assessment years.

Setting off business loss

Why there is a bar on setting off business losses against one's salary income?

K.V.S. Purushothaman, Chennai

This was done a few years ago in order to discourage tax evasion by the salaried class through cooked-up losses, as it were, from a business. The government seems to think that one in employment cannot possibly be in business as well and if he claims to be donning both the hats, it is for the purpose of tax evasion.

There seems to be considerable truth in the government contention even though there may be a few genuine cases. But then a peremptory law always has this effect — it tars everyone with the same brush.

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

http://MentorQA.blogspot.com

S. Murlidharan

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