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Query 1]

Sir, I have two properties. A row house located in Grampanchayat area for which I am getting Rs. 2,000/- rent per month. In FY 2012-13, I have paid Rs. 1,400/- as tax to Gram panchayat. The housing loan on this house is cleared in last FY. Second one is a Flat located within municipal corporation area. I paid Rs. 1,800/- as tax to NMC in FY 2012-13. For this flat I have taken loan from Bank, paid Rs. 80,000/- as principal &  Rs. 65,500/- as interest in FY 2012-13.

  1. Is there any other tax on rent income to be paid such as VAT, Service tax etc to be paid on my rental income part from Grampanchayat tax?

  2. Can you be please help me how to fill up the columns of Schedule HP of ITR2 with respect to above referred properties? []


  1. On the rental income which you are receiving, there will not be any liability whatsoever towards VAT & Service tax.
  2. The first property is let out by you and you are receiving the rent on this property. The rental income of Rs. 2,000/- pm will be taxable in respect of this property.
    (It may be noted that the if the fair & reasonable rent is higher than Rs. 2,000/-, then such higher value would replace the actual rent received].
    You can claim following two deductions from Rental Income:
    a] Gram Panchayat Tax paid
    b] 30% towards Repairs & Maintenance. (The deduction will be admissible whether or not any expenditure is incurred on repairs & Maintenance. 30% deduction will be on an amount left after reducing the Grampanchayat Tax from the Rental Income).
  3. The second house property, not let out by you, could be treated as a self occupied house property. You can have the benefit of deduction towards Interest on this house property. For self-occupied property, maximum interest on housing loan is restricted to 1,50,000/- p.a., subject to certain other stipulations. However, for the second house property, no deduction is available for repayment towards the principal portion of housing loan under section 80C as clause ( xviii) to section 80C of the I T Act reads as under: –
    “(xviii) for the purposes of purchase or construction of ‘a’ residential house property the income from …..”
  4. With above basic idea, you can file the schedule HP in ITR-2.



Query 2]

Kindly clarify regarding the following.

  1. I have invested Rs. 1 Lacs in Subordinated debt certificate (Muthoot doubling bond) of Muthoot finance limited.  The amount will become double in 72 months.

  2. I am having post office recurring deposit which will mature after 5 years.
    In both the above cases should I calculate the interest every year and show it in my IT return or can it be shown in my IT return at the time of maturity?

  3. I have taken a loan from employee’s co-operative society for the future needs of my daughter.  If I gift the amount to my daughter who is of 19 years & she makes a fixed deposit of the same, then the interest will be taxable in my hands or in the hands of my daughter. []


  1. The interest to be offered for taxation depends upon the method of accounting regularly followed by the assessee for recognizing the income. If Assessee is following cash (Receipt) system of accounting then the interest income has to be offered at the end of FD Tenure i.e., at the time of maturity of FD. If Assessee is following mercantile (Accrual) system of accounting then interest income is required to be offered for taxation every year on due basis as income of that year only.
    In view of the Circular No. 371 dated 21.11.1983 issued by the Central Board of Direct Taxes (CBDT), we advise the readers to offer the interest income on term deposits on accrual (due) basis only.
  2. The interest income of the daughter from the amount gifted by you would not be attract clubbing provision and would be treated as her Individual income only.

Query 3]
I am a house wife. My mother gifted me Kisan Vikas Patra of Rs.  3. 00 Lacs in the year 2004. The patras are going to be matured in April- 2013. Kindly advice me tax liability & how to save it? Although I am not a tax payer but I am holder of PAN number. Please provide your valuable advice. [] 


Subject to the opinion expressed above in response to Query No. 2, it appears that you haven’t filed the return for the earlier year as your income even after considering the interest from KVP on yearly basis was lower than the applicable basic exemption limit. If it is so, nothing would be taxable. However, if you have filed the return of income in earlier year(s) without considering the accrued interest on KVP then the interest amount would be taxable in the year of maturity and in such cases, you can save tax by investing in the tax saving instruments specified u/s 80C.


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