My wife and I are pensioners and are regularly filing income tax returns. Since June 2014, my wife has been staying in a rented house on a monthly rent of ₹8,000 in a different town (city corporation) for the education of our daughter. But I continue to live in my own house located in a municipal town away from the rented house. My wife has no house in her name. The lease deed has been entered into by my wife with the house owner. The house owner issues monthly rent receipts for the rent paid. My query is whether my wife can claim any deduction for the expenditure on rent paid. If so, what is the extent of deduction legally permissible?
Paul
As per Section 80GG of the Income-tax Act, 1961, an individual can claim deduction in respect of rent paid provided the person is not in receipt of house rent allowance. The exemption will be available only if the individual or the spouse or a minor child does not own any residential accommodation in the place where the person resides. Since your wife does not have a house on her own and you do not own a house in the place where she is residing, your wife will be able to claim the deduction mentioned above. The quantum of deduction available under this section is the least of the following: excess of rent paid over 10 per cent of total income; 25 per cent of total income; or ₹2,000 per month.
Total income for this purpose will mean the income computed after all deductions under Chapter VI-A, excluding the deduction under Section 80GG.
Please note that your wife will have to maintain a declaration in Form 10BA along with the rent receipts of the house to corroborate the exemption taken by her before the tax authorities.
Ours is a partnership firm with three partners — me, my wife and our married daughter. We invest in shares and equity MFs. Please let me know if we can claim long-term gain from shares (STT paid) and equity MFs as tax-free income.
Ashok R Hatekar
As per Section 10 (38), capital gains arising from the sale of equity shares and equity-oriented mutual fund units held for more than 12 months are exempt from tax if such shares are listed on a stock exchange in India and have been subject to securities transaction tax (STT). Hence, any long-term gains on sale of equity shares and equity-oriented mutual funds would be exempt, provided the firm is not in the business of dealing in stocks. Further, any corresponding long-term capital loss arising from these specified securities would lapse as the same cannot be set-off against any other gain/income.
However, if the firm is in the business of share trading, then the transactions could be taxable as business income.
The writer is Partner, Deloitte, Haskins and Sells LLP. Send your queries to taxtalk@thehindu.co.in