The Hindu Business Line : Gift versus donation

Do donations to organisations taking care of the physically challenged make the grade under Section 80G — exempt from Fringe Benefit Tax — given the fact that the dividing line between gift and donation is rather thin?

V. Murali, Bangalore

I think the income-tax department cannot treat donations as gifts in the context of FBT because the definition of the term ‘fringe benefits’ given in Section 115WB sets store by any consideration stemming out of employment.

Though this prime requirement has been ridden roughshod over by including expenditure on sales promotion which admittedly has nothing to do with employment, the department cannot whimsically change what is described as donation to gift merely because it can by so doing extract FBT, especially given the fact that there is a separate and special dispensation for dealing with donations, that is, Section 80G. It is by now a settled law that where there is a special dispensation, the general dispensation has to yield.
Leave encashment

What is the maximum amount of leave encashment received by a private sector employee exempt from tax?

Deepak, email

For those retiring on superannuation or otherwise after April 1, 1998, the amount is Rs 3 lakh.
What’s immovable property?

What exactly is immovable property? Does the term also include plant and machinery?

Vijay Hegde, Baroda

From the catena of Supreme Court judgments on the issue, it is clear that besides land and buildings, plant and machinery permanently fastened to earth of necessity would make the grade.

Thus elevators or lifts are very much immovable property because they perforce have to be attached to the building they are installed in.
Repatriating maturity proceeds

I was an NRI for about 22 years (1978-2000). I am resident in India since 2000. While working overseas I had subscribed to some mutual funds in US dollars out of my earnings overseas which I continue to hold.

Is there any tax liability on my part when I repatriate the sale proceeds of these investments at a future date? I have an overseas insurance policy taken in 1993 which matures shortly. Is there any tax payable while repatriating the maturity proceeds of this insurance policy?

V. Ramachandran, email

In terms of Section 10(10D) of the Income-Tax Act, 1961, any sum received under a life insurance policy is exempt from tax.

Since the section does not insist on the policy being taken in India or with an insurance company located in India, even the policies taken abroad qualify for this exemption.

The gains made from sale of units abroad would be taxable as long term capital gains.

You are not entitled to the exemption under Section 10 (38) because the transaction did not take place in a recognised Indian stock exchange.
Tax break for two houses?

I have been claiming Section 80C benefit in respect of repayment of principal of my house.

During this year I have acquired another house and have started repaying the loan in respect of this house as well. Will I get the tax benefit for both the houses?

S. Balaji, email

I am afraid not. Section 80C uses the term ‘a house” which implies that the benefit is restricted to one house of your choice.

S. MURLIDHARAN
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