Gold is a good investment when inflation is high

In a chat with readers on August 6, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax claims on home loans, HRA benefits, capital gains tax and how to plan and invest your money in 2008-09?

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For those of you who missed the chat, here is the transcript.

Kumar asked, Hello Sir, My Father gave me Rs. 5 Lakhs when I construct house for me. Can I claim Income Tax benefits under Interest for Self Occupied property as I am repaying the amount back to him? If yes, then what is the document I need to produce for the income tax department.

Mahesh Padmanabhan answers, You can claim the deduction for any interest paid/payable by you to your father, but you cannot claim any deduction for the principal repayment under section 80C. You would need to keep on record an agreement for the loan taken by you from your father along with the terms & conditions (including the rate of interest). Also, note that your father would need to declare this interest in his income tax returns.

Kumar asked, Hello Sir. Good Afternoon. My company don't have the provision for Conveyance Allowance (Rs.9600/- p.a), Medical Reimbursement(Rs. 15000/- p.a) and LTA. Can I claim all these things straight away with Income Tax department while filing my IT Returns? Please advise. Thanks a lot.

Mahesh Padmanabhan answers, In case your salary structure does not have these components and if your employer has not given these deductions then you cannot claim the said deductions independently in your returns.

rabiz asked, Hi, sir , I have invested in Reliance automatic investment plan. But the fund has not yet grown , my fund is in equity. I want to withdraw that funds as soon as three years are completed, What will be the tax implication on it. and what is your advise?

Mahesh Padmanabhan answers, Is your investment in Reliance fund a tax saving or ELSS fund. If yes then the minimum holding period is 36 months and if you redeem the same after this period then you would not be liable to any tax. In case the period is shorter than 36 months then you would be liable to tax.

rpm asked, Hi, i have invested in jm basic ,icici pru & reliance banking now this mutual fund has gone done till 50%.i have invested this amount for next 8-10 years time should i hold or sell this fund.

Mahesh Padmanabhan answers, The basic fundamentals of investing is to identify good investment options and then stay invested for a long term period. Market fluctuations keep happening and that really does not mean that you need to exit the market. In fact if you are using SIP medium of investing then you could leverage by investing at a lower NAV when the markets are down.

VCLINGAM asked, Hi, I am planning to invest Rs.5,000 monthly in MF by SIP. Please suggest me some good tax savings schemes.

Mahesh Padmanabhan answers, SBI Magnum & HDFC Tax saver are good funds to invest in terms of ELSS

Aruna asked, I am going invest Rs. 2000/- in any fixed depoit for 5 years whether can i take tax benefit. Please let me know. Thanks a lot.

Mahesh Padmanabhan answers, You can invest in 5 year term deposits with banks to avail of section 80C deductions. However, please note that you should specifically inform the bank about this and get their stamp to this effect on the deposit certificate.

pp asked, Sir please comment on HDFC tax saver, SBI magnum and Principal tax saver schemes. I want to invest in these funds for tax saving purpose.

Mahesh Padmanabhan answers, yes these are good funds and you could go ahead with the investing

Ravi asked, hello sir, is good to invest on gold? if so how to invest on it?

Mahesh Padmanabhan answers, Yes gold is a good investment option in a period of high inflation. You have 3 options to buy gold 1. You could buy coins / busicuits from banks / reputed jeweller with a proper purchase receipt and certificate. 2. You could buy gold Exchange Traded Funds (ETFs) from the stock market 3. You could purchase mutual funds with investments in gold mining companies

Rahul asked, Hello ! I have taken a housing loan for a property which i have rented. I am paying rent for my current accomodation. How i can claim HRA benefit ? Whether minimum of 3 heads (Rent Received, Rent Paid - 10 % of basic salary, 50 % of basic salary) or whole amount of HRA paid will be deducted under " House Property Income" head ?

Mahesh Padmanabhan answers, Your question is unclear and requires clarity. If you are trying to convey that you have let out your property and are getting rent for the same then there is no question of HRA which is part of salary component. If your house is bought with borrowed money then you would need to knock out the interest paid on such loan and 30% of the net annual rent received and then work out the total income that might be subject to tax.

Aruna asked, Sir, Total salary is Rs. 4,50,000/- after all deductions and in under setion 80 c/c if i make invetment of 1.5 lacs whether tax will be there or not

Mahesh Padmanabhan answers, The tax slabs are thus for ladies: Rs. 0 - 1.8 Lakhs - Nil Rs. 1.8 - 3.0 Lakhs - 10% Rs. 3.0 - 5.0 Lakhs - 20% Above Rs. 5.0 Lakhs - 30% On the total tax education cess & surcharge (if applicable) is levied. Section 80C carries a deduction limit of just about Rs. 1 Lakh Hence in your case the approx tax might work out to Rs. 22660.

manoharan asked, I am NRI working in Saudi Arabia. I can send money to my wife Resident in India to her personal bank account directly credited. Can she invest money and the income will be taxed in her hand. Am i correct.

Mahesh Padmanabhan answers, In your case we need to define three separate points for taxation. the first is the income earned by you in Saudi, which is not taxable in India the second, remittance to India, which again is not taxable in India the third, investments made in India, the income whereof might or might not be taxable in India. The point of regular flow of money to your wife's account, from where the investment is being made is tax free is incorrect. You would need to note that there are clubbing provisions applicable and accordingly your money invested in your wife's name would theoretically be clubbed in your hands and taxed accordingly

ravid asked, i have taken loan for a house and i am not staying in the same house for which i have taken loan, can i claim both HRA and intrest on house property and principal for this year?

Mahesh Padmanabhan answers, In case you are actually staying in a rented premise due to reasons of employment then you can claim both benefits i.e. of HRA as well as housing loan.

piu asked, I have broken two FDs prematurely. ICICI bank is refusing to give me a revised Form-16A even though the ultimate interest is much less than originally declared. How to plan my tax on the interest? Please answer.

Mahesh Padmanabhan answers, Your question is unclear, Form 16A is given based on actual interest paid / credited, then why the question of revision of Form 16A. In case there is any extra tax that has been deducted, you could either pay lower advance tax or claim a refund for the excess tax.

RG asked, Hello ! Whether interest accrued on NSC in Minor's name will be counted as interest income for his / her guardian?

Mahesh Padmanabhan answers, Interest on NSC can either be included as income on a yearly basis or on maturity. In your case the interest income of the minor would be included in the hands of the parent / guardian whose income is higher

ravid asked, i have taken 50000 tax saving deposit for 5 years in a bank.how much tax can i clain in this year(8.75% intrest)i am told that i am going to get around 70000. so that 20000 i can claim?

Mahesh Padmanabhan answers, Interest income on term deposit is taxable in the receipients hands. Hence in case you are accruing an interest of Rs. 4375 (50000 x 8.75%) in the first year then this amount would be taxable in your hands

Subrat asked, Hi Mahesh, is it neccessary to submit the rental agreement papers or only rent receipt is fine for showing HRA deduction?? As we were 3 persons when rental agreement was made but now 2 persons at present so can I show only rent receipt for HRA deduction as I am paying more rent now?

Mahesh Padmanabhan answers, It depends on your Company policy and in case your employers insist on the agreement, you would need to provide them with the same. At the same time you would be eligible for deduction based on the actual rent that you are paying. Hence you can avail of a higher rental deduction

Harneet asked, Hi I am currently saving around Rs 50k per month which are divided as follows 35000 of these are with bank RD, and 3000 SIP with SBI magnum and 10000 Reliance Growth FUND SIP. Is my portfolio correct, I am a bit reserved for market investments so most of my savings are in form of Bank RD's. Please suggest some gud alternatives if available, or is it fine to invest in market seeing the current situation

Mahesh Padmanabhan answers, Being risk averse, you could also look at investing in gold. Else, investment in equities either stocks or MFs (of fundamentally stong companies / MFs) with long term horizon could still work wonders in terms of effective yield from investments.

ajey asked, can a busineeman pay 10.25% tax only on all his income and have no further liability?

Mahesh Padmanabhan answers, That is not correct, in case of business / profession only the net income i.e. (Gross Income minus Expense) is taxable and hence the effective rate of tax might be lower as compared to a salaried individual.

raj asked, Will the profit earned through investments in Futures and Opions come under short term capital gains? If not under which Tax bracekt it will fall under?

Mahesh Padmanabhan answers, Profit earned on futures & options would be covered under the head Income from Business / profession and not capital gains.

sudhir asked, i have not filed my personal return for A.Y. 2007-08 & i have short term loss can i show in my return if i file my return in aug 08 please advice

Mahesh Padmanabhan answers, Though you can file your i-tax returns for AY 2007-08 now, but you would not be eligible to carry forward the short term loss for set off against future income.

Boli asked, Hello !, To claim tax exemption on Interest paid on loan taken from an individual for housing purpose, whether a certificate from lender stating receipt of Interest would suffice?

Mahesh Padmanabhan answers, An agreement to stating that you have taken a loan from that person would also be advisable in addition to the certificate.

raj asked, Will the profit earned through investments in Futures and Opions come under short term capital gains? If not under which Tax bracekt it will fall under. I am a salaried person and my auditor say since I am salaried and the income from f/o has undergone Transaction Tax it will fall under short term capital gains

Mahesh Padmanabhan answers, That is incorrect. Future / option income is taxable under the head Business / profession

Mahesh Padmanabhan says, Thank you friends for your participation in the chat session. We would now need to sign off for the day. Have a good day. Team RelaxwithTax