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April 18, 2000
Banking |
"Is leave encashment at time of resignation taxable?"The Rediff Money Channel presents everything you wanted to know about tax issues, but didn't know whom to ask. Is leave encashment at time of resignation taxable? — Subbarao The Officers of the Income Tax Department are known to have taken a stand that leave encashment is exempt only if it is received at the time of retirement. However, as per the decisions given by the Madras High Court in the case of CIT Vs. R. J. Shahney reported in 159 ITR 160 and by the Mumbai High Court in CIT Vs. D.P. Malhotra reported in 229 ITR 394, leave encashed at the time of resignation is also exempted from tax under section 10(10AA). Please send me details of what is covered under section 89 of the Income Tax Act. — Thomas Pinto The basic aim of Section 89 is to give tax relief to a person who receives arrears of salary in a particular year. When any individual receives any salary in arrears or in advance or receives profit in lieu of salary, he can claim relief for payment of tax on such salary under section 89(1) as under:
— Basab Ghosh No, you cannot take into account the whole amount of the receipt for the purpose of claiming exemption under section 10(13A) for House Rent Allowance. You can only consider the rent component pertaining to the house for the purposes mentioned above. The rent for furniture does not qualify for the exemption.
I retired in February 2000 and am getting a monthly pension of Rs 7,500. My terminal benefits work out to about Rs 1.4 million. Out of this sum, I intend giving Rs 2,50,000 as a gift, invest about Rs 1 million and keep the balance for other expenditure. — Mohana Moorthy First of all, you have not given any details of the terminal benefits received by you. So, I am presuming that the entire amount is exempt from tax in your hands. What does the income tax rule say about medical allowance and medical reimbursement? How much is taxable? What is the limit? What is the rule applicable for leave travel allowance? What is the treatment for Leave encashment? How do I compute all these things in returns? — Ravi Fixed Medical Allowance is fully taxable irrespective of any amount. However reimbursement of Medical Expenses actually incurred (to be supported by bills/vouchers) is exempt upto Rs 15,000 per annum. As regards leave encashment, it is necessary to know whether you are an employee of a private sector organisation or a public sector organisation. In the absence of information, I am assuming that you are a private sector employee. In such a case, if encashment is during the course of service, then it is fully taxable. However, if it is at the time of retirement or at the time of leaving the job, exemption is allowed under section 10(10AA) upto a maximum limit of Rs 2,40,000 subject to conditions laid down in the Income Tax Act.
I had taken a housing loan in April 1999 for a flat which is due for completion by April 2000. I have the following queries regarding the tax benefits for the FY 1999-2000.
— Jacob Koshy Since the property does not come into habitable existence during the FY 1999-2000, you will not be entitled to any tax rebate in respect of the repayment of any portion of the principal amount borrowed by you or in respect of the interest on such loan for the FY 1999-2000.
My grandmother is a tax payer and has a regular source of income, which we disclose in her regular tax returns. She had an irregular source of income that come as religious contributions whenever she is organizing a 'satsang'. — Vinay Gupta This income shall be included in income under the head "Income from Other Sources" and charged to tax at normal rates alongwith her other regular income. Please note that the officer may take a stand that this income is arising out of a systematically organised activity and is therefore to be treated as a Business Income. As long as your grandmother is not planning to claim any expenses against this income, such a stand on the part of the department would not make any difference to the taxation.
I am in a private job and earning roughly Rs 2,10,000 per annum. Though my tax is deducted every month upto 500 but, at the end of the year inspite of LIC and ULIP, I had to pay Rs 8,000 as tax.
I have bought a house from a private builder and have taken a housing loan of Rs 5,80,000 from GIC. I took this cheque on August 21, 1999. Since the said house has not been registered till now, I am still paying a pre-emi to GIC of Rs 7,200 per month. — P R Dhariwal As far as the financial year 1999-2000 is concerned, you cannot claim rebate in respect of the pre-EMI paid by you to GIC. The rebates are available only after the house is completed and occupied by you. Once the house is completed and occupied by you, the rebates and deductions available to you would be as under:
My father and I have different source of income. I have got demat account. My father is illiterate, hence is it possible for my father (tax point of view) to trade in shares by using my demat account? Will the IT authority treat it as loan taken by me from my father and club the gains in my income? — Ram Patil It would be advisable for you to open the demat account in the name of your father jointly with you. Then, you can operate the account by obtaining a Power of Attorney from your father. The first name must be that of your father.
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