Tax Talk

Kindly clarify the deduction of Rs 10, 000 in respect of interest on savings account with banks under section 80TTA of the Income-tax Act.

— Prashant Balakrishnan

The Finance Act 2012 introduced a new section 80TTA in the Income-tax Act, 1961. According to this section, a deduction up to Rs 10,000 in aggregate shall be allowed in the hands of an individual or HUF in respect of the interest earned on savings bank account with a bank, post office or cooperative society as specified. The deduction is not applicable to interest earned on time deposits (i.e. deposits repayable on expiry of fixed periods). This deduction of Rs 10,000 is applicable for AY 2013-14 onwards (i.e. FY 2012-13).

I want to sell a residential property and the proceeds would result in capital gains. Under the law, can the buyer pay the amount figuring in the sale deed through a cheque and the balance through another cheque or in cash? In whatever way the amount is received, I have no problem in complying with the provisions relating to capital gains.

Kindly advise.

— B. Balakrishna

According to the prevalent tax provisions, there is no restriction on the mode of payment of sale of a property. The same can be paid in cash or by cheque according to the terms and conditions mentioned in the registered sale agreement. Further, no disallowance is associated with the mode of payment of purchase consideration of a residential property according to the Income tax-Act, 1961. We understand that you will compute the capital gains on the transactions entered and shall comply with the applicable tax provisions. Hence, as long as the entire sale consideration is declared in the registered sale agreement and is disclosed by the seller in his income tax return, the mode of consideration received may not be an issue for the seller. However, the tax authorities may question the buyer as to the source of the cash paid by him.

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(The author is a practising chartered accountant)