Finance Minister P Chidambaram announced some changes in taxation policies this Budget. There were some benefits for senior citizens and working women.
In order to get a clearer picture of the post-Budget scenario and how it affects the individual's taxation policies, IBNLive organised an online chat with Amitabh Singh, Partner & Country Leader for Human Capital, Global Mobility & Employment Taxes, Ernst & Young.
Ravi: I’m physically challenged. What are the tax benefits that I can avail?
Amitabh Singh: To my mind, there is no direct relief. However, relief is available to a guardian for expenditure incurred on account of a dependent who is physically challenged (Section 80DD).
Amit: What is the limit for LTA conveyance exemption?
Amitabh Singh: LTA exemption is based upon family size, mode of travel and actual fare to the destination travelled.
Rajkumar Kumar: Can we know under which Section (except 80C) we file for returns on investment in equities and mutual funds. Long-term capital gains and dividends are currently exempt.
Senthil K: If the company is not running on a private ltd / partnership model, do we still need to file IT returns?
Amitabh Singh: All incorporated companies are required to file IT returns.
Kishore Kumar: I would like to know if there is any change in TDS rate and what is the rate charged for NRIs.
Amitabh Singh: There are no changes in TDS rates. However, personal income tax slabs have been revised and the same may apply to NRIs as well.
Rajkumar Kumar: Is ESOP still considered for the FB Taxes?
Amitabh Singh: Yes.
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Shardul: I have availed a home loan. The house will be completed in April 2008. But to get the completion certificate it will take 2-3 months. Can I avail the Income tax benefit for interest and principal amount as my employer deducts the tax based on the actual investment / proof provided monthly? My builder has said he would be able to give the Provisional Completion Certificate and the Bank has said they will provide a letter stating the amount which will be paid as interest and as principal amount for the FY80-09.
Amitabh Singh: You can request the employer but it will be the employer's prerogative to decide. However, once you give the completion certificate, the employer will be required to adjust over the succeeding months any excess taxes that may have been deducted in the preceding months.
Sachin: The dept of revenue has replaced earlier Form SARAL (1pager) to a new SARAL (5 -6 pager) which is not SARAL to fill in !!! Moreover the process of e-filing of returns in very cumbersome and does not always capture the real situation. Will there be a representation through post-Budget memorandum to FM?
Amitabh Singh: The Government has appointed TRP (tax return preparers) to help the general public to understand the new forms and also to do e-filing. In my experience it is not very cumbersome after the first time.
Shardul: What exactly do we mean by "Five year time deposit in an account under the Post Office Time Deposit Rules, 1981 shall also be eligible for tax benefits."
Amitabh Singh: Under Section 80C, there are various investment instruments that have been specified. Post Office Deposits have been added to that list provided the deposit is for 5 years.
Senthil K: I occupy two houses in the same city - shall I claim HRA 22k & 1.5 Lacs as Housing Loan exemption. Example: The home loan taken for the house outside the city, I just go there during weekends (so self-occupied not given for rent). During the weekdays, I stay at the home inside the city- so I occupy both the houses. Under these circumstances, both HRA & housing loan exemptions can be claimed?
Amitabh Singh: Technically you can only treat one home as self occupied.
Japesh Thakur: I wanted to know what is the exact significance of having HRA under Section 80 C. For example, if I pay a rent of Rs 8,000 per month, does this mean that on a yearly basis this is treated as investment of Rs 96,000? Why should an expenditure outgo be treated as "investment" under Section 80C?
Amitabh Singh: HRA is not covered under Section 80C.
Sachin: There was huge expectation that new tax codes bill will be tabled by FM this Budget session. It did not happen. When can we expect the new tax codes which are believed to be simple and easy to understand to come into effect?
Amitabh Singh: The tax code was expected to be put up on the website to invite public comments. The same has not yet happened. I believe that nothing will happen till general elections.
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Sachin: Is income earned by FIIs through capital market transactions still tax free?
Amitabh Singh: Not always. If they make short-term capital gains or business income that is taxable in India. However, FIIs that have come from countries that have favourable tax treaties with India, they may enjoy tax exemptions.
Kay: This is about the medical refund which has the upper limit of Rs 15,000 per year. What's the procedure if I’ve missed the last day of submission in my company?
Also which family members' bills are eligible for claims?
Amitabh Singh: This will be guided by your company's policy and if you missed the last date, you will have to appeal to them to consider your case favourably. Medical expenditure on family members is eligible.
Japesh Thakur: Currently the tax revenue to GDP ratio stands at close to 12 pc. What are the exact implications of this? Is it safe to presume that a portion of this revenue would be utilised by the Government to create infrastructure or does this simply get diverted to more non-plan expenditure like subsidies and salaries?
Amitabh Singh: The Tax/GDP ratio indicates how much of the GDP does the government collect as taxes. The ratio has been going up steadily over the past years but is still less than China whose tax/GDP ratio is nearly 20 pc. We all hope and pray that the government uses the revenues to create social and economic infrastructure and not on useless spending.
Naveen Kumar: Please give some insight on parent/ subsidiary tax on dividend (DDT).
Amitabh Singh: The Finance Bill has proposed that if the subsidiary declares dividends to its parent and pays DDT on the same, the parent while declaring its dividend need not pay DDT to the extent of that amount of dividend received from the subsidiary. However, it needs to be ensured that the parent holds 50 pc of the subsidiary's shares and is not, itself, a subsidiary of any other company.
Vipul: I have a home loan towards self-occupied property. Recently I bought a flat in another city towards which I took a second home loan. Would like to understand the ways & means of availing IT benefits wrt the second loan.
Amitabh Singh: If you put your second home on rent, you will be able to deduct the interest repayments from the rental income.
Hema: Regarding taxation of partnership firms, can we split the profit and file income tax individually according to their own slabs?
Amitabh Singh: Partnership is taxable at its own level and the profits of the partnership are not taxable in the hands of the partners.
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Sachin: Any clue from where the government is going to fund the agriculture debt waiver? Can we expect tax changes made in middle of the year to increase tax collections?
Amitabh Singh: We are all waiting for the government to make the announcements of how it will fund the debt waiver. Most likely they will issue bonds. We do not expect any changes in the tax rates in the middle of the year.
Sunil Soni: Can you please tell me the full impact of abolition of rebate under Sec 80 E and providing it as an expense?
Amitabh Singh:Earlier, STT paid by you was allowed to be adjusted against you total tax liability. As per the proposed amendment, if you are offering your gains from buying and selling shares as "business income", you can claim deduction of STT as expense against business income. If you are filing returns as "capital gains", you have no benefit of STT.
Kailash: My gross is 7 lakhs out of which 6 lakhs is taxable. How should I plan?
Amitabh Singh: You can take a home loan to buy a house and claim deduction for the interest payments, you can claim deduction under section 80C for upto Rs.1 lakhs. You can buy medical insurance for your self, spouse, children and parents and claim further deductions under section 80D.
Manish: I fill tenders for PWD jobs. I would like to know what are my tax liabilities if I am doing any work for the government.
Amitabh Singh: From your description, you appear to be a self-employed individual. You will be taxed under the heads "income from business or profession" for any income you generate from doing work for the Government.
Vinod: The current Budget seems to be a populist one, ensuring that no pressure is put on the common man. But will this Budget be able to sustain the same momentum, as these measures may lead to increase in inflation?
Amitabh Singh: It looks like a populist Budget mainly due to the loan waiver to farmers. However, there may be many pressing economic realities that have led the government to introduce this measure. The beneficial provisions are expected to increase spending power, part of which may be invested and part may go towards consumption. The increase in consumption will fuel demand for consumer goods and will generally augur well for the industry. However, if there is a demand-supply gap, that will lead to increase in prices and increase inflation.
Abhishek Jain: The FBT has now exempt company guest house from tax. Can the entrepreneur’s home be treated as company guest house?
Amitabh Singh: A company guest house is generally used for the stay of visiting officials of the company, customers etc. Personal residence cannot be a company guest house.
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