Your Taxes

I own a residential accommodation in Hyderabad that is entirely self-occupied. The rental value will be about ₹10,000 per month. Am I eligible to claim some tax benefits from the gross income on maintenance and house tax payments?

V Rama Rao

Based on the information available, I understand and presume that you have one house in Hyderabad in your name that is self-occupied. During the year, the said property has been completely self-occupied and no rental income has been earned from the same. Further, you have not got any housing loan in respect of this property and, thus, no interest/principal repayments of the housing loan been made during the year.

According to the provisions of the Income Tax Act, the annual value of one self-occupied property is considered nil and if the same is not let-out during the year, then no income is required to be offered to tax in respect of such property.

The Act does not provide for any deduction for maintenance expenses. Municipal tax paid (that is, house tax) is a deductible expense from the gross annual value (that is, actual/expected rent received/receivable from the property). However, since the annual value for a self-occupied property is considered nil, no further deduction is available in respect of municipal tax payments.

I had invested ₹20,000 in 2011 in infrastructure bonds and received ₹30,780 last month on maturity. How do I compute tax on the interest amount of ₹10,780? The other infrastructure bond that I invested in is listed on the exchanges. If I sell these bonds through an exchange after paying STT, what will be the tax implication?

Sivakumar V

Based on information available, I understand that during the year, you have received interest of ₹10,780 on maturity of infrastructure bonds, which were purchased by you for ₹20,000 in 2011. Further, you have certain other listed infrastructure bonds that you intend selling.

According to the provisions of the Income Tax Act, interest income from such bonds is a taxable income as income from other sources and no exemption is available with regard to the same. The same shall be taxable for you at the applicable slab rates for the relevant financial year.

Further, tax on sale of bonds listed on stock exchanges would depend on the period for which these were held before sale. Where the listed bonds have been held for more than 12 months, these shall be considered as long-term capital assets, and the gain (if any) shall be taxable as lower of the following: (a) 10 per cent without adjusting the cost of acquisition for inflation index, or (b) 20 per cent after adjusting the cost of acquisition for inflation index.

However, where the listed bonds are held for a period of up to 12 months, the same shall be considered as short-term capital assets and will be taxed at the applicable slab rates for the relevant financial year.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in