Income tax laws give you an option to file a belated return

Income tax laws give you an option to file a belated return

Income tax can be a matter of pain, even after you’ve paid it. And laws related to personal taxation, filing of returns, getting refunds, etc leave the common man in quite a dizzy. So, we have Suresh Surana, founder of RSM Astute Consulting Group, helping you with some of the common questions most taxpayers have. Read on…

I have sold a residential house property owned by me. I am planning to reinvest the sale consideration received in two flats. What will be the tax treatment in my hands for the sale consideration received and reinvested thereafter?

—Vivek Kumar

The amount to be invested is the capital gains and not the sale consideration in order to claim exemption with respect to reinvestment under Section 54 of the Income Tax Act, 1961. This exemption is restricted to only one residential house in India. Thus, if you acquire more than one residential house property, choice would be with you to avail the exemption in respect of either of the houses. In cases where both houses are being used as a single residential unit, courts have held that exemption can be claimed in respect of both the houses. If the investment is in the nature of a direct purchase, the same is required to be made within a period of one year or two years after the date of sale of original house property. In case of under construction property, the timeline is 3 years from the date of sale.

My father is a super senior citizen having gross income of around Rs 10 lakh. I would like to know about the legal way of reducing the tax to the maximum extent possible.

I heard about the tax saving deposit scheme.

—Dileep Sharma

While calculating the tax liability of your father, being a very senior citizen (aged 80 years or more), income tax shall be levied after the exemption limit of over and above `5 lakh. Further, in order to reduce the tax liability, the tax saving options which can be explored are mentioned as under:

(1) Open a PPF account as the deposits qualify for deduction from income under Section 80C of the Income Tax Act, 1961. Further interest earned thereon is completely tax free. The maximum contribution eligible for deduction under Section 80C is Rs 1.5 lakh. You may also invest in the Senior Citizen Savings Scheme.

(2) Interest earned on saving bank account is eligible for deduction under Section 80TTA of the Income Tax Act, 1961 to the extent of Rs 10,000

(3) Medical premium paid can be claimed under Section 80D to a maximum amount of Rs 30,000.

I have taken a loan for constructing a house in the year 2012 and have been paying interest since 2012. However, the construction of my house property was completed in the month of February this year. I am not sure about how should I claim deduction of interest paid on this home loan. Kindly suggest.

—Amardeep Singh

The interest paid during the period beginning 2012 and ending on the year prior in which construction of the house is complete i.e. up to March 2015 will be termed as pre construction interest. This pre-construction period interest is deductible in five equal installments starting from the year in which construction of property is complete i.e. FY 2015-16. The balance amount can be deducted in subsequent four years. Also note that if the house is a self-occupied property, the interest deduction will be limited to `30,000 as the construction has taken a period of more than 3 years. You are also required to obtain an interest certificate from the person from which the loan is borrowed. On the other hand, if the property is let out, there is no upper limit on the interest that can be claimed.

My grandfather had earned capital gain on sale of a plot of land. However, he has not filed even a single income tax return. What are the remedies available?

—Sanjay Kapoor

The income tax laws give you an option to file a belated return subject to certain timelines. It is not clear the year in which the compulsory acquisition has taken place. If the capital gains have arisen in the FY2014-15, your grandfather has an option to file a belated return of income up to 31 March 2017. If the compulsory acquisition has happened during FY 2013-14, your grandfather can file a belated return up to 31 March 2016. In order to file the return, your grandfather would be required to obtain a PAN card, if he does not have one. PAN application can be made in Form 49A.

I am planning to purchase Kisan Vikas Patra. What are the tax benefits under Section 80 of the Income Tax Act, 1961 in relation to KVP?

—Prakash Rao

Section 80C allows for deduction of up to the maximum limit of Rs 1.5 lakh for investment made in specified instruments. However, no deduction is allowed under the said section for investment made in Kisan Vikas Patra.

Further, the interest earned on KVP is also taxable. Alternatively, you can invest in National Savings Certificate, public provident fund, equity linked savings scheme, 5-year term deposit with a scheduled bank, etc. which are also eligible for deduction under Section 80C of the IT Act.

Happy Investing

Source:Yahoofinance.com