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Of property sale and tax filing in the ongoing financial year

Author: Col. Sanjeev Govila(Retd)/Saturday, February 10, 2018/Categories: Ask the Finapolis

Of property sale and tax filing in the ongoing financial year

I currently live in a rented property in Mumbai and pay around Rs 96,000 as annual rent. I get a salary of Rs 10 lakh from my present job and have no other sources of income apart from salary. On expenditure front, I pay Rs 500 per month towards tuition fees of my two children. I had also spent Rs 40,000 as medical expenses for my disabled mother till the end of January. I have not invested in any tax savings instruments. Please advise me on which tax savings instruments I should put my money to minimize the tax incidence for the current financial year.

Suhas Bane, Mumbai

For tax saving, one can invest in specified schemes under section 80C of income tax act and claim exemption up to a maximum of Rs 1.5 lakhs. These options are EPF, PPF, NSC, Tax savings FDs, Sukanya Samriddhi Yojana, Tuition fee paid for children and spouse, insurance policies premiums, equity linked savings scheme etc.

Apart from this, you can claim deduction under 80D up to Rs 55,000 for the health insurance premium paid for self, wife, dependent children and parents. Also, according to section 80DD, you can claim exemption up to Rs 75,000 for the treatment of disabled dependents. In case the disabled dependent is a person with severe disability, the maximum deduction allowed is Rs.1.25 lakhs. Deduction under Section 80DD is not dependent on the amount of expenses incurred. Hence, even if the actual expenses on above mentioned disabled dependent relative is less than amount mentioned, full deduction can be claimed under Section 80DD.

In your case, if you don’t have any EPF subscription, you can invest in any of the options mentioned above under Section 80C to fulfil your exemption limit of Rs 1.5 lakhs as you have only invested Rs 12,000 (for the tuition fee of your children). While all the other tax saving options are fairly safe and likely to give you moderate returns, you should consider ELSS schemes (ie, Tax Saving Mutual Funds) only if you are prepared to take market risks since in ELSS, the money is invested in stock markets. On the other side, ELSS are likely to earn more than other tax saving options, have the minimum lock-in out of all tax saving options of just 3 years, and all the returns that you will get will be tax-free as per current tax laws.

I recently have a job change and have to relocate to Mumbai from Hyderabad. As I had two homes in Hyderabad, I sold one property in the city in November, 2017 for a consideration of Rs 45 lakh. I bought that property way back in 1997. Currently, I am looking at buying a property in Mumbai but I am yet to finalize the same. Meanwhile, the money is sitting on my savings account. Should I show this as my income for the current financial year and pay tax? How could I avoid paying tax on this income? Please guide me on this matter.

Prasanth Reddy, Hyderabad

You plan to invest this money in a residential property. You have a few steps to follow. Firstly, please calculate the indexed capital gains on the property sold since you held it for more than two years. For doing this, you may contact any CA or may even do it yourself by googling – there are adequate websites which will tell you how to calculate the indexed gains. Please remember that you have to at least invest this capital gains amount into the new residential property to avoid tax completely. Secondly, you have to buy the new property within two year if a ready property being bought or within three years if an under-construction property is being bought. If the property is not bought before 31st July 2018 or before filing of your Income Tax Return (ITR) for the current financial year, whichever is earlier, you have to park the capital gains in Capital Gains Account Scheme with any nationalized bank in the country. The payment for the property will then have to made from this account. In a case you are not able to purchase a property before November 2020, then you will have to pay tax on the indexed gain amount.

We have a joint family (HUF) in Mangalore of Karnataka. I work as a senior assistant in the Health Department of the Karnataka government and live with my family in Mysore. Apart from my gross salary income of Rs 6 lakh, I have also received Rs 1 lakh as my share from the HUF income. Should I add the income from HUF to my total taxable income and pay tax accordingly? I am confused about the tax treatment as most of the HUF income is from agricultural sources. Please advise me on this matter.

Uday Raje Urs, Mysore

HUF is treated as a separate assesee from that of the Karta or the members of HUF. HUF has its own legal existence in law. Income from HUF is taxable in the hand of the HUF itself and this tax liability is to be discharged by Karta from the income of HUF considering the various sources of income of HUF and its taxability likewise as per the Income Tax Act. Once the due tax has been catered for by HUF, share of income received by the members of HUF is tax-free in their hands since the same income is not be taxed twice. Hence you need not add this income to your other income (i.e. Salary) while discharging your tax liability.

Recently, I visited a restaurant with my friends near my house in Chennai to celebrate one of our friend’s birthday. We had a combined bill of around Rs 5,000 for food and beverages. However, we found out that price of beverages comprising bottled water and cold drinks had been charged exorbitantly. Also, price of the food items was almost doubled since I last visited the same place in June last year. Is there any mechanism to take up this matter with authorities? Kindly guide me on this matter.

Amrutha Venkatesh, Chennai       

As far as charging of price on bottled water and beverages is concerned, different courts have ruled differently at different time. In most of the cases in the past, the courts had ruled that the restaurants cannot charge additional for such bottled beverages and water. However, a recent ruling by the Supreme Court in December 2017 has clarified that since the restaurants also provide a service with the bottled water, the MRP cannot be insisted upon at such places. So, the field is wide open to interpretations. Regarding the increase in prices, the general consumer practice is to check the restaurant prices before one orders. If you felt that the prices were inordinately high, you had the option of not ordering at that restaurant.

Nevertheless, the above still does not take away your right to lodge a complaint in case you feel aggrieved by these occurrences and you feel you have a case against the restaurant on one or both the counts. You can file a complaint on Whatsapp on 9869691666 or dial up the Weights and Measures department on landline number 022-22886666 between 10 am and 5:30 pm for appropriate action. Alternatively, you may approach the local consumer redressal forum and lodge a complaint there. For the complaint about the unusual price increase of the food items, it will help if you have a recent previous bill or their menu card giving out the much lower rates.

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Col. Sanjeev Govila(Retd)
Col. Sanjeev Govila(Retd)

Col. Sanjeev Govila(Retd)

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1 comments on article "Of property sale and tax filing in the ongoing financial year"

Tarsem Chand

5/24/2018 11:06 PM

Found the guidance rendered very useful.Pl. tell in detail as to how to go about practically creating an H.U.F. What are its benefits?

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