“RENT PAID FOR RESIDENCE IS ALSO ELIGIBLE FOR DEDUCTION”

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Query 1]

Please clarify the below query:
I am a NRI & staying in Bahrain. I have a NRO account in SBI & my fixed deposit transactions shows cess & tax deduction amount. Whether I am qualify to fill 15G form to avoid above mentioned deductions? [Anand Kale- anand_hinga@hotmail.com]

Opinion:

A person who is resident in India can only submit form No. 15G. Non Resident Indian under the Income Tax Act-1961 cannot submit form No. 15G.

 

Query 2]

Facts: I want to ask you a query about tax & clubbing. I am a student as well as I am doing a part time job from which I am earning Rs. 60,000/- p.a. My father is employed in PSU. He had a KVP & on its realization of Rs. 5,40,000/-, he deposited Rs. 5,01,000/- in Monthly Income Scheme (MIS) in the joint name of my mother & me. 1st holder is my mother & I am the second named therein.  We are receiving Rs. 3,424/- interest every month on the same which we are depositing in RD A/c (joint name- same as MIS) with nationalize bank by adding up further sum to make it Rs. 4,000/-.

Question:

  1. Interest in full will be received in my mother’s hand as she is 1st holder & is it to be clubbed in full in my father’s hand? Or
  2. Half in my mother’s hand & half in my hand?
  3. How would be clubbing in this case?

My father, after exhausting the basic exemption & chapter VIA without this clubbing, has no tax liability. Please give your precious advice regarding this in detail exemption, tax treatment etc. My mother is housewife. [Vaibhav Jain-mailtovaibhav_jain@rediffmail.com]

Opinion:

  1. Clubbing Provision:
    Where an asset is transferred by an individual to his spouse or Minor Child or Daughter in law, directly or indirectly, otherwise than for an adequate consideration, any income from such asset is deemed to be the income of the transferor. [64(1A) / 64(1) (iv) / 64(1)(vi) of the Income Tax Act-1961].
  2. Deposit of amount in the Name of other person: Tax Implications:
    i) If the intention of your father while depositing the amount in MIS in the name of different family members is to make HIS OWN INVESTMENT without diluting the ownership of the Funds, then the income from the amount so deposited will be treated as his income only and will be taxable in his hands only.
    ii) If, however, the intention is to gift said fund to the respective account holder at the time of deposit, then the income there from shall be treated as the income of the name bearer on the depository receipts. However, if the gift is to the Wife and/or Minor son or Daughter-in-law, the interest income of the fund so deposited shall be taxable in his hand only by virtue of clubbing provision of section 64(1A) / 64(1)(iv) / 64(1)(vi) of the Income Tax Act-1961. If gift is to a major son, the income there from would be outside the purview of clubbing provision and income would be treated as the income of the major son.
    In your specific case, MIS is in the joint name. Keeping above provision in mind, you can decide the taxability of the amount.
  3. Tax Planning:
    If you are not a minor, the best tax planning by the father could be to gift the amount to you. In that case, interest income would be taxable in your hands only as clubbing provision is not applicable in such case. Since your total income, even after including the income from MIS, would be below the basic exemption limit, no tax liability would accrue in your hands.

Query 3]

My sister is living in a rented premise for his job in Amravati. She is working in a private limited company and is regularly paying her rent by cheque to the landlord. Whether the rent paid is tax deductible as she doesn’t have any house there in Amravati and she is not receiving any House Rent Allowance from the company where she is working? [manishr*****@gmail.com]

Opinion:

  1. Any individual (whether salaried or businessmen) can claim deduction from its income towards rent payment of a residential accommodation u/s. 80GG of the Income Tax Act. The condition precedent to claiming deduction under this section is:-
    a] He has to prepare a declaration in Form No.10BA.
    b] He or his minor child, spouse or HUF of which he is a member, should not be owner of a house at the place where he ordinarily resides or performs his duties; or he should not be owner of any house at any other place, the income therefrom is to be determined under section 23(2) (a) or, as the case may be, under section 23(4) (a) (i.e., income from self-occupied house property).
    Amount of deduction – The deduction admissible shall be the lower of the following:
    (i) house rent incurred in excess of 10% of “Total Income”; or
    (ii) Amount at 25% of “total income”; or
    (iii) Rs. 2000 per month.
    Note:
  2. The term “Total income” means total income after allowing all deductions expect the one provided under this section itself.
  3. In case of salried assessee who is in receipt of HRA from the employer, no deduction u/s 80GG is admissible. However, they can claim deduction u/s 10(13A) of the Income Tax Act-1961.[button color=”” size=”” type=”round” target=”” link=”https://thetaxtalk.com/”]home[/button]  [button color=”” size=”” type=”round” target=”” link=”https://thetaxtalk.com/submit-article-publish-your-articles-here/”]Submit Article [/button]  [button color=”” size=”” type=”round” target=”” link=”https://thetaxtalk.com/discussion-on-tax-problem/”]Ask Question [/button]

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