Tax Talk

I am a bank employee and pay approximately Rs 90,000 as tuition fees and hostel fees a year for my daughter's education. Am I eligible for a tax rebate for this amount? Please advise.

— Raju G

According to Rule 2BB of Income Tax Rules, 1962, any allowance granted to an employee to meet the hostel expenditure on his child, shall be exempted in the hands of the employee to the extent of Rs 300 per month, per child up to a maximum of two children.

Accordingly, if your employer is giving you such hostel allowance, then you can claim exemption of the hostel expense up to the extent of Rs 300 per month, per child.

Further, according to Section 80C of the Income Tax Act, 1961, tuition fees (excluding payment towards any development fees or donation or payment of similar nature), paid to any university/ college/ school/ other educational institution situated within India, for the purpose of full-time education of any two children of the individual, shall be allowed as deduction under the overall deduction limit of Rs 1 lakh (this limit is for deduction under sections 80C, 80CC and 80CCD). You should declare details of the tuition fees paid by you to your employer, so that such deduction is considered while withholding taxes from your monthly salary, else you can claim the said deduction at the time of filing your tax return.

I work at a leading PSU. My taxable income is more than Rs 15 lakh. Further to my salary TDS, TDS at the rate of 10 per cent has been deducted for a fixed deposit with a leading public sector bank. While trying to file my tax return for FY 2012-13, I found that the I-T deducted is short of the tax calculated. As a result I am unable to file the return. Kindly let me know how I can overcome the problem.

— Anil D

Please note that according to the Income tax laws, banks are required to withhold income tax at the rate of 10 per cent on interest income credited on fixed deposits. However, the interest income so earned by the individuals is taxable in their hands at the slab rates applicable to them.

Since your taxable income is more than Rs 15 lakh, the applicable slab rate in your case is the maximum tax rate of 30.9 per cent.

Accordingly, you will first have to pay self assessment tax i.e. total tax payable by you according to the applicable slab rate less the taxes withheld by your employer and the bank. Upon payment of self assessment tax, you would be required to report the details of the challan in your tax return form and file your tax return.

(The author is a practising chartered accountant)

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