Today, Homi Mistry, tax partner at Deloitte, Haskins & Sells, answers your questions
Will the Rajiv Gandhi Equity Savings Scheme give better tax benefit than ELSS?
The Rajiv Gandhi Equity Savings Scheme (RGESS), is designed for resident individual investors investing in specified stocks, having gross total income not exceeding Rs 10 lakh. A deduction from taxable income is allowed only for the first year of investment to the extent of 50 per cent of the investment made in RGESS (the investment is limited to Rs 50,000).
Under ELSS, a deduction is available to all investors for any year in which such investment is made and a deduction of the entire amount invested, subject to a maximum of Rs 1 lakh is allowed. Hence, investment in ELSS saves more tax as compared to RGESS on a standalone basis.
Further, RGESS has a lock-in period of three years and the tax benefit is withdrawn if this is not met. ELSS has no such lock-in period from a tax perspective.
I have been working for five years, but have not filed returns. Can I file them all now?
You are required to file an income tax return only if your taxable income exceeded the basic exemption limit prescribed for each of the five years. If an assessee has not filed his return for a particular financial year, he can file a belated return under Section 139(4) before two years from the end of the relevant financial year. Hence, you can still file your returns for the financial year 2010-11 and onwards. However, if the return is not filed within one year from the end of the financial year, the tax officer may levy a penalty of Rs 5,000. Further, if the tax due on the returns has not been paid, then there will be interest payable on such tax.
I sold a residential property and made a profit of Rs 1 crore. Can I use the money to buy a new house and invest in capital gains bonds?
Yes, you can invest the gains in bonds issued by the National Highways Authority of India or by the Rural Electrification Corporation Ltd up to a maximum of Rs 50 lakh and apply the balance towards purchase of a new house. While the investment in the bonds is required to be done within six months after the date of transfer of your residential property, the new house can be purchased anytime within two years from the date of such transfer.
I bought a property under construction two years earlier. I will get the possession next year. However, I have been servicing the home loan for the past two years. Will I be able to get tax benefits for the interest and principal repayments once I get the house?
Yes, tax benefits for principal and interest can be claimed only in the year in which the house is completed and onwards.
The amount of interest paid for the financial years preceding the year of completion can be claimed in five equal yearly instalments, starting from the year in which the house is completed. However, the principal repaid prior to the financial year in which the house is completed is not deductible.
Views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in
