The Hindu Business Line : HRA in India with an apartment in Switzerland

I was posted outside India (Switzerland) for the financial year 2007-08 by my employer. I was being paid HRA as part of my Indian salary and was provided with an apartment in Switzerland.

Now that I have returned back, my employer is telling me that the entire HRA paid to me during this financial year is taxable for me because I was provided an apartment abroad.

I do pay rent in India and my family was not with me in Switzerland for the entire period. Can you please let me know if there is a law that says that my HRA is taxable under above condition?

Dhruv Talwar, Gurgaon

There have been judgments in another context — with reference to the question of exemption for self-occupied house while computing income from house property — saying that such self-occupation need not be by oneself and that occupation by such distant relatives as cousins would do.

On this reasoning, your case a fortiori merits exemption in terms of Section 10(13A) because the occupants were your immediate family and not distant relatives.

Your employer is trying to save his skin which of course is perfectly understandable.

But while filing the income-tax return, do claim refund for the excess tax which in your opinion has been deducted due to non-allowance of exemption. You must persevere because instinctively the department would be inclined to dismiss your claim but you should challenge their stand in appeal.

TDS as deduction

Can I claim TDS as deduction? Please let me know the procedure.

Mary, email

Tax deducted at source (TDS) is nothing but payment of advance tax and to this extent you don’t have to pay tax. In other words, against the tax liability determined, TDS would abate and only the balance would be payable.

TDS however cannot be deducted as a business expenditure which is the case with indirect taxes such as sales tax and excise. Therefore, no matter what a person is doing — whether he is in business or is an employee — TDS would abate only against one’s tax liability.

Home loan repayment

I am a college librarian. My college has refused me the tax benefit for housing loan repayment on the ground that I am only a co-applicant. This has resulted in greater amount of tax being deducted.

K. J. Reddy, Hyderabad

The college has clearly erred. You should show them the relevant portion of Section 80C.

Anyway, you should go ahead and file your income-tax return claiming the deduction under Section 80C and claim refund of tax that has been deducted in excess.

Payment in lieu of notice period

I have paid Rs 32,000 in lieu of the mandatory notice period. Is this deductible while computing income from salary?

Shashi Bhushan Kumar, email

The income-tax law does not permit such payments to be deducted. Income-tax is required to be computed strictly as per the dictates of the law. In the event, there is no way you can get any tax compensation for it even though in equity, you deserve the taxman’s sympathy.
Set off of losses

Can one set off the loss from the F&O (futures and options) segment against profits from the cash segment and vice-versa?

S. K. Gupta, New Delhi

Section 43(5) categorically says that trading in derivatives shall not be deemed to be a speculative transaction and accordingly if you are in the business of dealing in shares you can pretty well do so.
TDS by foreign company

We do job work for a German company. We also do similar work for Indian companies which deduct tax at source. Is the German company also required to do so?

Ajay Sharma, email

Even though Section 194C obliges every company to deduct tax at source on payments to contractors, in my humble opinion foreign companies are not obliged to fall in line for the simple reason that the Indian government’s writ does not extend to other countries, including Germany.

In the event, the only way a German company can be so compelled is through a double taxation avoidance agreement (DTAA) which the Indian government is entitled to sign with any country. You may therefore examine the Indo-German DTAA to find out whether a German company is indeed obliged to deduct tax at source and deposit the same with the Indian government.

S. MURLIDHARAN
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HRA in India with an apartment in Switzerland

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