Prajna Capital |
- Tax benefits on House Rent Allowance
- Features of Inflation Indexed Bonds
- Reverse Mortgage and Taxation
| Tax benefits on House Rent Allowance Posted: 09 Jul 2013 04:06 AM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
House Rent Allowance (HRA) is a benefit that is provided by many employers across major cities across the country. The tax working for this purpose can ensure that a part of the overall allowance received by the individual would be tax exempt in their hands.
While the exact working for this tax benefit is a significant factor, what also needs to be seen is the various procedural terms related to the entire working. This is important for the proper benefits to be available. Here is a look at the issue in detail.
Overall
When an employee gets a HRA, there has to be a working undertaken to see the extent of this receipt that would be tax free in their hands. The working would require that the least of the following three would be allowed as a deduction
One is 50 percent of salary where the residential house is situated at Mumbai, Kolkata, Chennai and Delhi or 40 percent of the salary where it is situation at any other place.
Two; the HRA actually received and three, the excess of rent paid over 10 percent of salary. But in these calculations it is the nature of the various terms that are important for the individual to consider.
Salary
The definition of salary for this purpose would include basic salary and dearness allowance where the terms of the employment provides for such an allowance. It will also include commission that is paid as a fixed percentage of the turnover that is achieved by the employee.
However, all the other allowances and perquisites would not be included and hence would have to be kept separate from the working. This sets the tone for the basic inclusion of the various figures where the salary is being considered.
Nature of consideration
There is also the question of the total amount of salary that would be considered for the year. A change in the manner of the calculation on this point would impact the overall benefit that the individual would be able to get.
This is the reason why the nature of the salary needs attention. The salary has to be considered on due basis so the moment that this becomes due at the end of the month then it would be included. It cannot be said that the salary has not been paid so this would not be covered.
This also brings to light another important factor. In some years, there could be a past payment that is actually received but this would not be considered for the purpose of this calculation because this is just received and is not due.
Working
A few other factors are also needed to be present when the benefit is to be claimed. The first thing here is the conditions when the benefit for the rent will be available as a deduction.
So, if an employee lives in his own house then the benefit will be denied. Similarly, if he does not pay any rent on the house where he lives then the benefit will again be denied. Also, if the rent paid does not exceed 10 percent of the salary then the calculation will ensure that the benefit in terms of the deduction will become zero.
Usually, the benefit is to be calculated on an annual basis and the various items that are included herein would have to be looked at accordingly. There are however times when this is not possible and there are changes in the various figures then the working could be undertaken on a monthly basis.
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--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
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| Features of Inflation Indexed Bonds Posted: 09 Jul 2013 12:11 AM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
1. IIBs will be having a fixed real coupon rate and a nominal principal value that is adjusted against inflation.; Periodic coupon payments are paid on adjusted principal.; Thus these bonds provide inflation protection to both principal and coupon payment.; At maturity, the adjusted principal or the face value, whichever is higher, will be paid.
2. Index ratio (IR) will be computed by dividing reference index for the settlement date by reference index for issue date (i.e., IR set date = Ref. Inflation Index Set Date / Ref Inflation Index Issue Date).
3. Final Wholesale Price Inflation (WPI) will be used for providing inflation protection in this product.; In case of revision in the base year for WPI series, base splicing method would be used to construct a consistent series for indexation.
4. Indexation Lag; Final WPI with four months lag will be used, i.e. Sept 2012 and Oct 2012 final WPI will be used as reference WPI for 1st Feb 2013 and 1st March 2013, respectively.; The reference WPI for dates between 1st Feb and 1st March 2013 will be computed through interpolation.
5. Issuance method: These bonds will be issued by auction method.
6. Retail Participation: Non-competitive portion will be increased from extant 5 percent to up to 20 percent of the notified amount in order to encourage participation of retail and other eligible investors.
7. Maturity: Issuance would target various points of the maturity curve in order to have benchmarks. To begin with, these bonds will be issued for tenor of 10 years.
The new series should have a mention of the coupon rate and other connected matters as most of the retail small investors may not be able understand the concept of coupon rate.
For example, the current WPI is 4.89 percent while CPI is 9.39 percent. The difference is quite high. It will be realistic if the CPI is adopted to provide a positive relief. The interest will not be paid to the investor on year-to-year basis but at during redemption.
The face value of such bonds to the principal will be adjusted with the inflation. Thus, at the time of redemption itself the adjusted principal amount or the face value of the Bonds, whichever is higher, would be paid to the investor. The interest, however, would be paid to the investor from time to time depending on the terms.
Generally, they are for ten years. However, mobility will be available to the investor for pre-mature encashment as these would be listed on the stock exchange. The Government has not thought of any specific tax exemption, deduction or rebate or extra additional tax benefit in respect of investment on them.
The interest will be subjected to income-tax. At the time of maturity the amount received will enjoy the benefit of cost inflation index especially when they are sold after three years. To encourage secured safe investment in these, the government should also provide for tax deduction under section 80C of the Income-tax Act, 1961.
In case, the Government were to think of granting tax deduction on investment, then surely the investment of the common man would flow very fast in these.
It is good to see the Government appreciating the need of issuance of an instrument of investment safeguard the common man. The Government should also think a sort of Social Security Scheme would be achieved by making these Bonds really effective, lucrative and interesting.
For this purpose, if certain tax sops are made available to the investors of these bonds that it will go a long way in bringing very big chunk of money of small investors whereby the investment of these small investors is safe, secured and takes care of mounting inflation in the years to come.
The more and more these bonds are made popular, the more concern will be of the Government to ensure that inflation is kept under control. In nutshell it can be said that small retail investor in particular should wait and watch for the new investment opportunity in the next couple of months.
Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
| Posted: 08 Jul 2013 10:30 PM PDT Invest In Tax Saving Mutual Funds Online Call 0 94 8300 8300 (India)
As per the provisions of income Tax act, 1961, the act of mortgaging the property for the purpose of securing reverse mortgage is not treated as transfer affecting any tax liability. Moreover the money received by the owner of the property under reverse mortgage shall not be treated as income and a specific exemption has been provided under Section 10 (43) of the Income Tax Act.
However it is important to note that as and when the property is disposed of, either by the bank or the borrower or its legal heirs, the normal provisions of capital gains will apply and the owner or his legal heirs shall be liable to pay capital gains tax as per the provisions applicable to general sale of property.
However if the legal heirs decide not to sell the property but pay the outstanding dues fully, no tax implications will arise as redemption of the property does not amount to transfer.
So from the above it becomes very clear that reverse mortgage is the golden walking stick in the hands of senior citizens in their old age and has come to rescue of such senior citizens who stay in their own house.
Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com
--------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )
------------------ Best Performing Mutual Funds
|
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