T. Banusekar

What is the maximum sum that can be claimed as deduction under Section 80C in respect of the tuition fees paid? — Sachin K.

Section 80-C, which allows a deduction in respect of tuition fees, does not place any restrictions on the amount that will qualify for the deduction.

The said Section only provides for allowing a deduction in respect of any two children in respect of assessee, where the payment is towards tuition fees (excluding any payment towards any development fees or donation or payment of a similar nature) whether at the time of admission or thereafter for the purpose of full-time education to any university, college, school or other educational institution situated within India.

Section 80-C, it must, however, be noted, allows a deduction in respect of certain investments and payments and does not allow a deduction of an amount in excess of Rs 1 lakh towards all such payments and investments.

I am presently working and receiving my salary in India since February 2008.

Previously, I received salary as student, in dollars from April 2007 to January 2008 for which I had filed tax returns and paid tax in the US before coming to India.

As I am a resident of India in the financial year 2007-08, I understand that the salary I received in US dollars is taxable in India also.

Is there any benefit under the Double Taxation Avoidance Agreement between India and the US?

In such case, at what rate do I convert the salary that I received in dollars into rupees? Will I be eligible to claim the deduction under Section 80-C? — Mitesh Thakkar

You are correct in your understanding that the salary received by you in the US will be taxable in India as well, since you are a resident of India under the Income Tax Act.

From the facts given by you, it appears that you would be a resident of India even in accordance with Article 4 of the Double Taxation Avoidance Agreement between India and the US.

If this were so, the tax paid on the salary in the US can be claimed as a credit in India at the lower of the tax payable in the US or in India on such doubly-taxed income, in accordance with Article 25 of the Double Taxation Avoidance Agreement between India and the US.

The salary will have to be converted into rupee on the basis of the telegraphic transfer buying rate as on the last day of the month immediately preceding the month in which the salary is due or is paid, as provided for in Rule 115 of the Income Tax Rules, 1962.

The deduction under Section 80C will be available to you in respect of the payments and investments made by you and referred to in the Section 80-C.

My son, myself and my wife and took possession of a new flat in our joint names in July 2007. While my son is employed, I and my wife are retired. The flat was purchased out of our savings and housing loan from a bank in our joint names.

My son is paying the EMI and claiming the benefit of interest payments and principal repayment towards the housing loan.

I have sold a flat recently which was in my name. The same was acquired in March 1991.

Can I claim the exemption on the long-term capital gains on sale of this flat against the purchase of the new flat since I have sold this flat within one year from the date of acquisition of the new flat? If so, what is the procedure for making such claim? — Ganesh Taishetye

There could be a doubt on your son’s eligibility to claim tax benefits in respect of the interest and principle repayment of the housing loan. This would be so because from the facts as stated by you, it appears that the flat belongs to you. Exemption can be claimed by you in respect of the capital gains earned on sale of the flat and on reinvestment in another flat.

This would be so since Section 54, which allows an exemption on transfer of a residential house and on reinvestment in another residential house requires that the asset transferred should be a long-term capital asset.

A long-term capital asset is an asset which has been held for a period exceeding 36 months and in the case of shares or securities listed in a recognised stock exchange, for a period exceeding 12 months.

The gain earned by you from the sale of the flat would be long term, since it has been held for a period exceeding 36 months.

Section 54, which allows the exemption, requires the reinvestment to be made by way of purchase of a residential house within one year before or two years after the date of transfer and in case of construction, the same should be completed within three years from the date of transfer.

Since you have purchased the new flat within one year before the date of transfer of your old flat, the exemption will be available to you. You can file your income tax return and make a claim for such exemption.

Is tax to be deducted at source on payment of interest for delayed payments to creditors as the same will be treated as interest in the books of account? — Venkatesh B.

Section 194A of the Act requires tax to be deducted at source on any payment by way of interest other than interest on securities.

This Section requires tax to be deducted at the time of payment or credit whichever is earlier. Any interest paid on delayed remittances to creditors and which bears the character of interest will also fall within the sweep of Section 194A and tax will have to be deducted at source under this Section.

It may be noted that there would be no requirement to deduct tax at source under this Section, if the payment or credit does not exceed Rs 5,000 an annum.

In case of long-term capital loss arising out of sale of shares of listed companies, in which of the following cases I am eligible to carry forward the losses:

The sale is routed through recognised stock exchanges and securities transaction tax is paid at the time of sale.

The sale is an off market transaction between seller and buyer.

What documents are required to support the claim of carry forward of losses in the above cases. — Ashal

The long-term capital gain from the sale of shares of listed companies through a recognised stock exchange and on which securities transaction tax is paid at the time of sale, would be exempt under Section 10(38).

Consequently, the loss, if any, from such transactions will also have to be ignored. If, however, the sale of shares is through off market transactions between a buyer and seller, the gain if any would be taxable and would not be exempt.

Consequently, the loss, if any, will also be recognised.

Such long-term capital loss can be set off against long-term capital gains or short-term capital gains in the same year and if the same is not fully exhausted, can be carried forward and set off either against the long-term or short-term capital gains within a period of eight assessment years immediately succeeding the assessment year in which the loss was first computed.

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