Your Taxes

I am a pensioner. I am in receipt of rental income of Rs.14,000 from my house property in Mumbai. I have shifted to Coimbatore where I am paying rent of Rs 10,000 for the accommodation in Coimbatore. I shall be thankful if you could advise me whether I can adjust my rental income with the rent paid..

S Jayaraman

The Income Tax Act does not provide for adjustment of rental income against rental payments. Rental income will be taxed under income from house property. You could claim deduction for expenditure like municipal taxes, interest on housing loan, statutory deduction for repairs etc.

Since you are a pensioner, you could claim deduction under Section 80GG towards rental payments in Coimbatore. However, such deduction has a limit of ₹5,000 provided you or your spouse do not own any residential property in Coimbatore.

I have a 10-year single premium insurance policy with a lock in period of five years. This lock-in ends in April.

I wish to surrender the policy, and will gain around ₹30,000 . Will this gain be taxable?

Bhooma Ramanarayanan

Any sum received under an insurance policy issued on or after April 1, 2012 is exempt from taxation if the premium payable for any of the years during the term of the policy is 10 per cent or less of the actual capital sum assured.

If the policy is issued on or after April 1, 2003 but on or before March 31, 2012, then exemption is not available if the premium payable for any of the years exceeds 20 per cent of the actual capital sum assured. Understand that you have a single premium policy. Accordingly, depending on the date of issue, if the single premium paid is in excess of 10 or 20 per cent of the sum assured, exemption would not be available. As a result, the entire surrender value (not just gains) is taxable as income as per the applicable slab rates.

It should be noted that, if the insurance proceeds exceeds ₹1 lakh, the insurer is required to deduct tax at the rate of 1per cent. Taxes withheld by the insurer can be adjusted from the final taxable liability.

My wife is investing in shares in her name, but the amount is funded by me. The short-term gains earned by her are below the taxable limit (that is, up to ₹3 lakh, being senior citizen).

Are short-term gains taxable ? My wife is not having any other income. Should she file tax return?

SCK Pillai

Understand that the only source of income for your wife is short-term capital gains from share trading.

Since her investment in shares were funded by you, income arising from such investments is taxable only in your hands under the clubbing provisions [Section 64(1)(iv) of the Act]. You would have to include the gains with your other income and determine the tax liability.

Since your wife does not have any other income and short-term capital gains are taxable in your hands, she is not required to file a tax return.

The writer is Partner, Deloitte Haskins & Sells LLP. Send your queries to taxtalk@thehindu.co.in

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