Queries on tax

et a certificate specifying the disability from a government hospital and submit it to your employer. Also fill up form no 10 IA and submit it to your employer in order to get tax deduction.

Between April and July 2006 my package was Rs 2.44 lakh per annum and it increased to Rs 3 lakh from August, 2006. What is my tax liability?

You will have to give tax on two different salaries -- April to July and August to March. Add up two salaries and deduct investments made under section 80C of the IT Act. You will have to give tax on net taxable salary as per the tax slab. You pay 10 per cent tax if the net salary is more than Rs 1.10 lakh, 20% if it is between Rs 1.5 lakh and Rs 2.5 lakh and 30% if the salary is above Rs 2.5 lakh per annum.

If I withdraw Rs 20 lakh from my bank account and keep it in post office savings account, do I have to give TDS on its interest?

You have to give income tax on bank interest. There is no tax on the amount of interest accrued on the post office savings.

Is it okay if the premium on pension plan contributed by the employer is added to the salary of the employee for the purpose of tax deduction calculations?

Yes, it is okay if you add the employer's contribution along with the salary. The contribution made towards pension should be within the overall limit of Rs one lakh. So, don't claim twice.

How do I keep a record of my shares for the purpose of calculating short-term capital gains tax?

Make a list of your shares and put them under the two categories -- sold before 12 months and sold after one year. You don't need to give tax if you hold the shares for more than one year. This will serve as a ready reckoner for you.

I had taken a loan of Rs 40,000 for studies. I have joined a government job in September. Will I get a tax deduction?

You will get a tax deduction on interest and not on repayment of the loan. The total interest paid will be deducted from the salary.

Can I claim HRA when my brother is staying in the same house?

Take a receipt of the amount you are paying to your brother for his share of property. Submit the receipt to your employer to get tax deduction on the HRA.

Tell me about the tax treatment of Futures & Options?

Income will be treated as business income.

Can I claim tax deduction under 80C of the IT Act on the education loan I have taken for my son who is studying abroad?

You can avail of tax deduction for only higher education that too within the country.

Can I claim medical reimbursement by giving a declaration to the employer? While my employer has shown an annual medical reimbursement of Rs 15,000 as business expenditure, it is not mentioned in form 16.

It is mandatory to spend on medical needs before you can claim reimbursement of medical expenses. However, you can't claim tax benefits on the basis of declaration. Only medical reimbursement is exempt from tax and not allowance. However, employer gets tax exemption for both allowance and reimbursement taken as business income.


Is long-term gain tax-free or is it added to income?

Long-term capital gain particularly from listed securities is not taxable and is not added to your salary.


Should I invest in PPF or SIP?

Both modes of investment are good. Income from SIP is tax-free if you hold your investment for at least one year. But a person above 50 years of age should continue to invest in the old account instead of going for SIP.

But if you don't have an account and you are above 45 years of age, I suggest, investment in a new PPF account is not a good idea given it's lock-in period of 15 years. You can invest in SIP instead. Young people can invest in PPF also if they fear their spending habits. One person can open only one PPF account.



I have invested in fixed deposits in the name of my wife and child. Will this income be clubbed along with my income?

Income from two FDs would be added to your income. Income from your child's account will be added till he/she becomes a major, while income from wife's account will be clubbed with your account till you are alive.
But if instead of a gift you give a loan to your wife at a reasonable rate of interest, and she pays you interest from earnings, it wouldn't be clubbed with your income in that case.


How is tax calculated on an accommodation provided by the employer?

There are three methods of calculations:

1. If you are in a city having a population of over 25 lakh, you will have to add 15 per cent of the salary as prerequisite.

2. If the population is between 10 and 25 lakh, you add 10 per cent of the salary.

3. If it is less than 10 lakh, 7.5 per cent of the salary will be added to your salary in the form of perquisite. These rules come into place only when the employer owns the house and gives it to the employee.

If the employer has taken the accommodation on lease or rent, a flat rate of 15 per cent of the salary will be taken as perquisite.



I get HRA as part of my salary. Now I want to buy another house with a home loan. Can I claim HRA as well as tax deduction against interest payments on home loan and the principal amount?

If you give house rent receipts to your employer, you can claim tax deduction. At the same time you can also claim tax deduction to the tune of Rs 1.5 lakh against interest payment and up to Rs one lakh against principal amount repayments.



I am an agent for general insurance. The company is deducting TDS on my commission. How can I claim it back?


Your company deducts TDS on insurance commission and gives you a TDS certificate. You can calculate the total amount of income tax payable. If your commission is more than the TDS deducted by the employer, you have to give more tax to the government.

Calculate your commission and tax payable. Suppose your income from commission is Rs 1.4 lakh and the company has deducted the TDS and you have no other income. To get refund, file tax returns giving TDS details.

If your income is Rs 1.5 lakh or more and tax deducted is more than the tax payable, you have to give details in the tax return form to get the refund.