Reader's corner: Is petrol bill reimbursement in monthly salary tax-free?

My uncle (dad's brother) wants to gift a property to me (his nephew) or my wife. What will be the tax on the transaction?

There is no gift tax in India. Further, gifts from close relatives are also not taxable in the hands of recipients. Accordingly there will be no income tax liability on you when your uncle transfers the property in your name. It is also important to maintain proper documentation of the gift for record purposes. You may need these details when you sell the property, and according to current provisions, you will have to take the cost of acquisition as the cost at which your uncle bought the property, to determine your capital gain liability. 

However, if the property is gifted to your wife by your uncle, the transaction is not covered under the exemption and is liable to tax in her hands since your uncle does not qualify as a close relative of your wife according to the definition in the Act. The taxable value of the property will be the stamp duty value of the property so transferred. For movable property, the fair market value (FMV) of the same will be considered for taxation purposes.

I am about to join a new job. My new employer is offering me reimbursement for petrol bill. Is this reimbursement going to be tax-free in my hands? Second, will the employer pay tax on it, or will it claim this money as an expense?

You have not mentioned for what purpose the reimbursement is and whether it is for two-wheeler or car. If the reimbursement is for employee-owned vehicle, which we assume is a car, then nothing is taxable where reimbursement is for official duties. In such a case, the employer is required to maintain specified documents, including details such as kilometres travelled, destination, purpose, date, etc. If you use the vehicle both for office and personal purpose, amount up to Rs  1,800 per month (plus Rs  900 per month in case of driver) can be claimed as non-taxable and remaining amount is taxable. The amount increases to Rs  2,400 per month (plus Rs  900 per month) in case the engine capacity of the car is above 1.6 litres. In case you use the vehicle for only private purposes, nothing is exempt and the entire reimbursement will be taxable. An employer is required to withhold tax, where any portion of reimbursement is taxable. 

I am buying a property. The house is 20 per cent below the circle or ready reckoner rates. Before purchasing the house, is there any way by which I can inform the tax department about the lower value or get the valuation done by a government-appointed valuer?

According to Section 56(2)(x)(b) of the Income-Tax Act, in case the stamp duty valuation of the immovable property exceeds the consideration you are paying by an amount of Rs 50,000 or 5 per cent of the consideration (whichever is higher), the difference will be considered as income in your hands. It is also provided that where you dispute the valuation based on stamp duty, the tax officer can refer the case to a valuation officer. Where valuation, as determined by such valuation officer, is equal or higher than the stamp duty value, you will end up paying tax on the difference between the purchase price of the property and the stamp duty value. There is no mechanism provided under the Act, where you can approach the tax officer for the same to get the valuation done before you buy the property. However, you may consider getting the valuation done from a registered valuer at your own to substantiate that the FMV is equal to the purchase price and accordingly inform the jurisdictional tax officer that you have purchased the property at FMV, although it is lower than the stamp duty value. This you may do immediately when you buy the property or at the time of filing the return, and keep it with you for future reference to substantiate your claim.

The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. 

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