Query corner: Taxation

Biz loss can’t be set off against salary income

I received around Rs 12 lakh for FY11 from my former employer by way of PF settlement and leave encashment, after tax deduction. I suffered a business loss of around Rs 8 lakh in FY11. Can I set it off against my income from the employer? I also have a shortterm capital gain of around Rs 10 lakh this year, as I sold off mutual fund units within one year of buying them, which attracts 15% tax. Can I adjust the Rs 8 lakh business loss against this short-term capital gain and pay tax only for Rs 2 lakh? —M JOSEPH

Business loss cannot be set off against salary income. However, you can set off the business loss against capital gains.

Tax deducted at source on nro fixed deposit

I am an NRI. My bank has deducted TDS on my NRO (non-resident ordinary) fixed deposits at a concessional rate of 12.5% against 30% in view of the selfdeclaration submitted by me under the terms of the provisions of double taxation avoidance agreement between India and other countries. The bank has given me Form 16A. Since the total interest income earned by me is far below the exemption limit, can I claim refund from the I-T department by filing I-T returns for FY09-10? In future in order to avoid TDS can I furnish Form 15G to the bank? — MEENA RAJEEV

Yes, you can claim a refund of income tax deducted at source. However, being a non-resident, you cannot furnish declaration in Form 15G to the bank. In order to avoid TDS, you will have to obtain a certificate for non-deduction of tax at source by making an application in Form 13 with the jurisdictional tax officer. Such a certificate has to be then submitted with the bank.

TDS ON WITHDRAWING PF

I am self-employed and my annual income is under the present income-tax exemption limit. I want to withdraw my provident fund from my former employer’s PF Trust. It will be around Rs 6 lakh to Rs 7 lakh. I want to put this money in the New Pension Scheme (NPS). Is there any TDS deduction while with-drawing it? — UMESH PRASAD

Your ex-employer’s PF Trust will not deduct income tax at source only if such withdrawal is tax-exempt. Withdrawal is tax-exempt if: (1) You have rendered a continuous service with the employer for five years or more; Or (2) your services were terminated due to your ill health or due to discontinuance of employer’s business or any other cause beyond your control. In other cases, the withdrawal will be tax-able and taxes will be deducted at source by your ex-employer’s PF Trust.

TAX ON ENCASHMENT OF PRIVILEGED LEAVE
I was an employee of The Bank Of Rajasthan which has been merged into ICICI Bank. I had accumulated privilege leave (PL) of up to 240 days when I was with the Bank Of Rajasthan. Following the merger, ICICI Bank kept 180 PLs in my credit and encashed the remaining 60 days’ leave. I want to know whether the encashment is taxable or not? — PARUL

In my view, leave encashment would be taxable as the same was received during the course of your employment.
TAX BENEFIT ON JOINT HOME LOAN

I along with my wife have taken a joint home loan for a flat under joint-ownership. Though, we have jointly taken the loan , I pay the entire EMI. Can I claim tax benefit for repaying the loan or should it be split between myself and my wife? We had also purchased a flat in Delhi for self-occupation three years ago which is in my wife’s name and she pays 100% EMI for the loan. Though, we both jointly took the loan, I don’t not claim any tax benefit for this property. What is the best combination to avail of tax benefit? — NEERAJ KUMAR JAIN

Since you are making EMI payments, you will be eligible to claim entire tax benefits. Deduction on interest payable on loan can be claimed under Section 24(b) while deduction on principal repayment can be claimed under Section 80C. If the house is rented out, there is no restriction on the amount of deduction on interest payable on the home loan. However, the total amount of deduction under Section 80C cannot exceed Rs 100,000.

(Vaibhav Sankla, executive director, Adroit)