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I am a housewife and my husband is an NRI. I save money from the remittances made by him and invest in shares. I have earned short-term capital gains of less than Rs 1,10,000. Am I required to pay tax? I have no other source of income?

Reshma, email

Short-term capital gains are normally taxed at a special rate of 10 per cent flat. But if one has got unused quota of tax-free income, which in your case is Rs 1,45,000, being a lady who is presumably not a senior citizen. In your case, as you have no other income, the entire amount of short-term capital gain would be exempt from tax because such gains are less than the tax-free limit of Rs 1,45,000.

I have a house which I have given on rent. I am a school teacher and I get HRA (house rent allowance) of Rs 450 per month. My auditor tells me that this is fully taxable because I own a house. Is he right?

Sujatha Rajagopal, Coonoor

I am afraid he is not. You should be paying rent in excess of 10 per cent of your salary, to qualify for the exemption. In that case, HRA would be exempt to the extent of the least of the three amounts — actual HRA, rent paid in excess of 10 per cent of salary and 40 per cent of your salary.

That you own a house does not come in the way of claiming this exemption. You have incidentally shown the rental income as your income as you should.

I am planning to file returns of income on my own. I have few things in my Form 16 to be clarified. Which section of income-tax exempts medical reimbursement of Rs 15,000 (medical bills produced), conveyance of Rs 9,600 (transportation) and food of Rs 5,500 (food coupons which I took)?

Chiranjeeva, email

The proviso to Section 17(2) grants exemption on medical reimbursements up to Rs 15,000, and the rule made under Section 10(14) grants exemption on transportation allowance up to Rs 9,600. Food coupons are not your botheration because it is for the employer to pay Fringe Benefit Tax (FBT) on them.

Can one get deduction under Section 80C towards repayment of housing loan in respect of the second house after having utilised the benefit earlier for the first house?

Arjun Lal Mandal, email

Yes.

As per IT guidelines, we are supposed to disclose mutual fund investments of Rs 2 lakh or more per annum. Is it an aggregate of all mutual fund schemes or is it per scheme per annum?

S. Murugan, email

Some specified categories of persons like the Registrar of Registration of immovable property, trustees of mutual funds and bank managers have been called upon to furnish annual information report of transactions by persons exceeding the specified threshold. For example, a trustee of a mutual fund is called upon to report investments of Rs 2 lakh or more in units coming under its purview. Thus SBI mutual fund’s trustees would report your case in case you have invested during the financial year in the units of SBI mutual funds under various schemes run by Rs 2 lakh or more.

The income-tax return form calls upon the assessees as well to report the same. In other words, they have to give the details of their specified investments coming under the ambit of Section 285BA. The idea seems to be to facilitate corroboration.

Kindly clarify if I can claim my HRA (house rent allowance) exemption and also the exemption for the interest paid to bank during the year towards housing loan taken for construction of a residential house. The construction is not yet complete but the bank has deducted interest and I am still staying in a rented accommodation and continue to pay rent.

Sonali, email

The exemption for HRA has nothing to do with your housing loan. You get the exemption if you actually pay rent in excess of 10 per cent of your salary for the relevant period. Since the house is still under construction, you can accumulate the interest paid during the construction period and claim them as deduction in five equal instalments spread over five financial years.

In case of a private limited company that does not have any employees but only two directors who do not draw any salary, the directors are being paid reimbursement of expenses for travel, food etc.

Does FBT (fringe benefit tax) apply on such reimbursements? Will the directors be considered as employees even if they are not drawing any salary from the company? Will the company be considered as an employer for the purposes of FBT provisions?

Gulshan, email

I can really see your point. Section 115WB says that fringe benefits mean any consideration for employment.

Therefore no person can be called upon to pay FBT unless and until he is also an employer in the first place. Evidently, the directors in your question are part-time directors who are by no means employees of the company.

Normally, based on this, I would have clearly stated in the negative as to whether this company is liable to pay FBT. But I refrain from doing so due to the muddled thinking reflected in the legislation.

Section 115WB (2) then goes on to list the various items of expenditure amenable to FBT. One of them is sales promotion, including publicity. Heavens, where does employment come into this. It seems the idea of FBT was mooted, by whoever did so, to apply brakes on the so-called conspicuous consumption.

That explains how some extraneous items have crept into the regime. But one can rely upon the leitmotif of the entire legislation — it is not on unless the targeted expenses are meant to benefit the employees — to mount an attack on it to the extent it strays away from its objective as culled from the definition of the term FBT given in Section 115WB(1).

S. MURLIDHARAN

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