I am 58 years old and working as a senior executive with a PSU. Please clarify on the following:
1. What is the total amount that can get Sec 88 benefit for PF contributions? Ours is a PF trust managed by company trust.
2. If I have to cover up balance what are the infrastructure instruments available with good interest?
3. If we opt for a VRS, getting nearly Rs 8 lakh as terminal benefits net of income tax can an individual dream to get a monthly income of Rs 6,000, assured, if so which are the avenues to go for investments where the TDS can be overcome? The essence of my question is simple: to have a decent living post-VRS with a monthly income of at least Rs 6,000 per month without much of income tax and TDS problems.
— Ramammurthy Sanagavaram, email@example.com
1. One can claim rebate u/s 88 on the contribution to PF upto a limit of Rs 60,000 for FY 02-03.
2. You may contribute to Infrastructure Bonds of ICICI/IDBI if and when these are available.
3. Yes, it is possible to earn Rs 6,000 p.m. Have a good look at Pure-growth, Open-ended, Debt-based schemes of UTI/MFs (PODs). Being pure-growth, these are so much tax-efficient that you can earn as much take-home (= tax-free) income as Rs 5 lakh on a corpus of Rs 50 lakh. Being open-ended, these are like an SB account where you can deposit and withdraw at will. The only difference is that the banks require five minutes or more to effect a withdrawal, but PODs need five working days or less. Being debt-based, the safety of the capital as well as the income (around 10 per cent + at this juncture) is implicitly certain but not explicitly assured.
However, these may not be good for you. It is difficult to provide you with a solution best suited to the needs of you and your family without having your financial biodata.
I have taken my PAN number. This year, my income is taxable. Suppose if my income is not taxable in the next year, then is it compulsory to file return? If possible, kindly explain Employees Provident Fund Scheme. (I have gone through your book In the Wonderland of Investment.) I want to know if I am paying Rs 780, then what is the employer’s contribution? How much amount goes for insurance and pension scheme?
It is found that many people don’t know about this scheme.
— Pratiksha Sane, firstname.lastname@example.org
It is better to file a return for the sake of continuity. If you are covered under 1-by-6 scheme it is compulsory to file a return. The Employees Provident Fund Scheme was covered in detail in my 18th edition. Fortunately, you appear to be having the edition with you. I have nothing more to add.
What are the tax implications of investments either in companies, MFs or UTI, for NRIs who are retirees from the UN system and who used foreign money for such investments? Will the TDS apply to them as they are income tax exempt even if they return to India?
— Amol Mukherjee, Switzerland
U/s 2 of the UN (Privileges and Immunities) Act, 1947 (read with Sec 18 of the Schedule thereto) salaries and emoluments paid by the UNO to its officials is exempt. Even any pension received by ex-employees after the retirement is also exempt from tax --- Circular 293 dt 1.2.1981. You will note that the exemption is limited only to the salary and pension received from UN. You will be treated on par for rest of your income. Accordingly, the income from investments in companies, MFs/UTI will be taxed in your hands and will also suffer TDS.
Is a plot purchased for residential purpose part of a housing property? I have purchased a residential plot in a fully-developed colony by taking loan from ICICI Home Finance. Is the amount paid towards principal eligible for rebate u/s 88(2)(XV) or 88(5)? Is the interest paid towards home loan (purchase of above said plot) covered under loss from house property and eligible for rebate U/s 24?
— Dr Harvinder Singh, Patiala
Both the concessions, rebate on repayment of capital and deduction of interest are allowed only when the income from house property becomes chargeable to tax. In other words, the construction should be complete, the flat should be ready for occupation and the municipal annual value is known. The interest for the years prior to the year in which the property was completed, shall be deducted in equal installments for the year during which it was completed and each of the four immediately succeeding years.
Unfortunately, there is no corresponding provision in the case of tax rebate for repayments of capital during the period, prior to completion of construction. This is possibly an oversight of the lawmakers.
I am an Indian citizen having retired from the IAS in 1987. My wife and I recently got our permanent residential cards (Green Cards). I am getting a respectable pension and would like to transmit my rupee savings to the US in dollars. Whether this can be done, if so how much and what procedure I should follow?
— SH Thacker, New York
My reply pertains to a foreigner working in India. Such persons can transfer 75 per cent of the salary earned while working in India to his native country. However, you may apply to the RBI for repatriation indicating your need and it normally grants special permissions. You and your wife are persons of Indian origin who have earned the salary/pension while working in India. This pension is not transferable to the US. You can, however, transfer your interest income from Indian investments to the US subject to tax clearance.
— (The author may be contacted at email@example.com)