(Chartered Accountant)


Query 1]Sir, we are working with a PSU. Kindly clarify whether group insurance compensation received from insurance company by staff is exempt from income tax or not?
[N. Subramanian]
1. Insurance compensation received under a group insurance scheme is not taxable in the hands of employee since it is a capital receipt.2. Further, if a person receives ex-gratia payment from the Central Government/ State Government/ Local Authorities/ or a Public Sector unit, consequent upon the injury to the person while on duty, such ex- gratia payment will not be liable to income tax. [Circular No. 776 dated 08.06.1999]

Query 2]
Sir, Kindly let me know whether deductee can claim credit when deductor did not issue or refused to issue Certificate for the Tax Deducted at Source. Is it not binding on the part of deductor to issue TDS Certificate? What steps can deductee take in such case?
[Vilas M. Chandorkar]
Firstly it may be noted that as per the provision of sub-section (1) of section 203 of the Income Tax Act, 1961 deductor of tax at source (T.D.S) is duty bound to issue a TDS certificate within the prescribed time period to the person whose tax has been deducted. The time limit for issue of T.D.S in most of the cases is one month from the end of the month in which the T.D.S is done by the payer of income [Rule 31(3) of the Income Tax Rules, 1962].Furthermore, Circular : No. 785, dated 24-11-1999 issued by the Central Board of Direct Taxes (C.B.D.T) makes it mandatory to issue of certificate for tax deduction at source (T.D.S.) under section 203 in all cases where tax is deducted at source, including cases where payments are made ‘net of tax’ in terms of section 195A.Section 272A(2g) provides for levy of penalty @ Rs 100 per day for the period of delay if any persons fails to comply with the provision of section 203. So, a person who has deducted tax at source should ensure the issue of T.D.S certificate within the prescribed time period to avoid the penalty leviable u/s 272A(2g).In your case, we are of the opinion that you can undertake following measures to ensure legal compliance from your side: -Make a written communication clearly mentioning the above provisions of law and delays in number of days.If still payer do not respond and do not issue the T.D.S. certificate, communicate it to the respective C.I.T. (T.D.S. section) stating the facts of the case and praying for issue of direction to the payer for issuance of certificate.Even if you don’t get the T.D.S Certificate, claim T.D.S. in your income tax return by attaching the copies of letter written to the payer of income and C.I.T. (T.D.S. section).

Query 3]
My queries are:
1. Can a house or Flat be registered in joint names i.e., husband & wife name?
2. Can a loan be applied in joint names & interest rebate can be claimed?
3. Suppose we book for new flat/ house today in joint names by taking loan from bank , then at a later date can the sale proceeds of already owned plot/flat (in either of us name) be re-invested in the new property for claiming capital gain tax? If so, how to go about it?Kindly explain in detail more about joint acquisition of house property
[R. Srinivasan, Bhilai]
1. House / Flat can be purchased in joint names.2. If a house/ flat is purchased in joint name, both husband and wife can have the income tax benefit in respect of interest / principal repayment of housing loan. The deduction shall be available in the ratio in which the loan is availed. Also, the deduction u/s 80C towards registration expenses etc shall also be available in the ratio of property ownership.3. If you sell already owned plot with a holding period of more than 3 years, then you can claim an exemption from long term capital gain U/s 54F. For Flat with holding period of more than 3 years, exemption from LTCG is available u/s 54.4. There are various other stipulations that need to be complied with for valid claim of exemption from LTCG U/s 54 or u/s 54F.

Exemption u/s 54:

The main stipulations incorporated in section 54 are as under: -a) The capital gain should arise from the transfer of long-term capital assets being buildings or lands appurtenant thereto, being a residential house.b) The income from such residential house should have been assessable under the head ‘Income from House Property’.c) Benefit of exemption u/s 54 is available only to an Individual or HUF.d) The transferor must purchase a residential house within a period of one year before or two years after the date of transfer; or, in the alternative, the assessee must constructed a residential house within a period of three years from the date of the transfer of the original house.e) The amount invested in the purchase or construction of new residential house should either be equal to or more than the gain, or where it is less than the amount of capital gain, the shortfall shall be taxable under section 45 of the Act.

Exemption u/s 54F

The main stipulations incorporated in section 54F are as under: -1. Benefit of exemption u/s 54F is available only to an Individual or HUF.2. Exemption is available only if the long term capital gain arises from the transfer of any capital asset other than a residential house property. If the asset transferred is a residential house property then an assessee can claim an exemption u/s 54 (and not u/s 54F).3. The assessee does not within a period of 2 years purchase or 3 years construct any residential house other than the new house.4. The assessee is not the owner of more than one residential house (other than the new asset) on the date of transfer of the original asset.5. The quantum of exemption amount will be worked out on the following basis:a] If the amount invested is more than or equal to the net consideration then the entire capital gain. b] If the amount invested is less than the net consideration, then the amount invested x capital gain/net consideration.


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