Tax Talk

Is filing tax returns mandatory for a non-resident Indian whose gross income is less than Rs 1.5 lakh in 2011-12? — Shivram

A person is mandatorily required to file a return of income for financial year 2011-12 if his total income (including income of any other person for whom he is assessable) exceeds the income exemption limit prescribed for the year.

The exemption limit prescribed for a person is Rs 1.8 lakh for the financial year. The basic exemption limits for resident (according to the Income-Tax Act) women (below 60 years of age), resident senior citizens (60 years or more but less than 80 years) and resident super-senior citizens (80 years or more) are Rs 1.9 lakh, Rs 2.5 lakh and Rs 5 lakh, respectively.

Assuming that you are a non-resident according to the Act in the said financial year, since your gross income is not more than Rs 1.8 lakh, you are not mandatorily required to file a tax return. However, in case you wish to claim a refund of any excess taxes paid or deducted, you should file a tax return. Also, if you are claiming any benefits under a double tax avoidance agreement, it is advisable to file a tax return.

Please note that with respect to filing obligation for any other financial year, the specific provisions as applicable to that year should be examined.

I got a housing loan of Rs 6.9 lakh from my employer in 2001, for which I am enjoying tax sops on the principal and interest. Now, I intend to purchase a second house or a flat with another loan. My employer said that I cannot enjoy tax deductions for for the second loan. Under what circumstances, can I claim exemptions for my second loan? — J. Jayashankar

Under the Act, where one house is owned by you and used for self-residence, the same is considered as self-occupied property (SOP) with an annual value of nil.

Deduction up to a maximum of Rs 1.5 lakh a financial year is available towards interest on loan taken against such a house, provided the house has been acquired or constructed within three years from the end of the financial year in which loan is taken (where interest on loan pertains to pre-acquisition or pre-construction period, one-fifth of the same is deductible in each financial year, starting from the year of acquisition or construction). Further, a deduction is available towards principal repayment of such a loan under Section 80C of the Act (within overall limit of Rs 1 lakh a financial year), subject to conditions and if the loan is taken from specified lenders. The loan from an employer qualifies for deduction under Section 80C only where the employer is a body constituted under a Central or State Act, a public company, a public sector company, a specified university, a college, a local authority or a co-operative society.

Where the house owned by you is let out (LOP), the interest payable on loan against such a house (without any limit) is available as a deduction. Also, deduction towards principal repayment is available under Section 80C of the Act, subject to the conditions discussed above. In case you purchase another house and both are for self-residence, you may consider one of them as SOP. Deductions as available to an SOP will be available against it. The other house should be considered as deemed to be let out and subject to tax at a deemed rental value, as prescribed. Deduction towards interest and principal repayments as available to an LOP would also be available against this house. Where any or both properties are let out, deduction towards interest and principal repayments would be available against them as available to an LOP.

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(The author is Executive Director, Tax, KPMG.)