Guidance
No I-T return needed if salary income less than
Rs 5 lakh
by A.N. Shanbhag

Q: I would like to know if the exemption from filing tax return for income below Rs 5 lakh is applicable to salary earners only. What about those taxpayers who are no longer salary earners (having retired) having a pension of Rs 3,756 per annum, besides income on FDRs of around Rs 1.13 lakh (as per return filed for AY 11-12). Please clarify.

— T M Subramanyam

A: Pension is treated as salary for tax purposes and therefore, the notification should have also been applicable to those who earn pension from an ex-employer. However, the exemption in question is only applicable to current salary earners and not to those who receive pension.

PPF account

Q: I want to open a PPF account. Kindly tell me the minimum amount that we can deposit in a PPF account. Moreover, kindly tell me whether we can pay it monthly or yearly? And lastly somebody told me that if we deposit some amount like Rs 10,000 once, the instalment would be same for 15 years. Is it true?

— Updesh Khinda

A: PPF allows varying contribution from year to year to accommodate financial ups and downs. The minimum annual contribution is Rs 500 and the maximum is Rs 70,000. Subscription shall be in multiples of Rs 5, paid in one lump sum or in instalments not exceeding 12 in a year. This does not mean that one cannot make two or more contributions during the same month. In other words, the account can be opened with a contribution of Rs 5 but the additional contributions made during the financial year should take the total contribution at minimum of Rs 500 and maximum of Rs 70,000.

Rebate on home loans

Q: I have a self-occupied flat at Nagpur. I have availed a home loan of Rs 12 lakh and getting exemption for interest as well as principal paid for home loan. Now, I have got possession of my second flat at Ghaziabad in FY 11-12. I had availed a loan of Rs 12 lakh for this in FY 09-10. Interest paid during FY 09-10 and 10-11 were approximately Rs 30,000 and Rs 70,000, respectively. The second flat is presently vacant and not rented out. I am paying Rs 2,000 per month for the maintenance purpose to the builder towards maintenance charges and Rs 4,000 annually towards township maintenance. Both the flats are in my name and EMI paid through my account. My question is:-

i) How is tax calculation to be done for the second flat?

ii) What are the deductions available for this?

iii) What are the rules for interest exemption paid for the pre-possession/construction period for the second flat which is in this case Rs 30000 + Rs 70000 i.e. Rs 1 lakh.

iv) How the interest exemption for both the flats can be calculated if the interest for the FY 11-12 for flat no. 1 is Rs. 0.90 lakh and Rs 1 lakh for flat no.2.

— Shashidhar Kumar

A: Both the concessions u/s 24 for interest and u/s 80C for the part repayment made of the principal amount are available on any number of housing loans. The total concessions are limited by the ceilings of Rs 1,50,000 for interest and Rs 1,00,000 for repayment made of the principal amount.

If an assessee has two or more residential houses, only one of these of his choice shall be treated as self-occupied. Others will be considered as deemed let out. In case of interest related with a let-out (or deemed let-out) house and also a commercial property, the entire interest is deductible. Consequently, you can claim the benefit up to Rs 1,50,000 on the first loan and the entire interest without any limit on the second loan. The second house will be treated as let out even if it is vacant and the standard rent or rent receivable in that area will be treated as your income. Fortunately, the restriction of the holding period of 5 years for deduction of capital repayment u/s 80C is not applicable to deduction of interest.

Finally, the pre-construction interest is to be deductible in five equal instalments beginning from the year in which possession is obtained.

The authors may be contacted at [email protected]