Is a car provided by my company a taxable perk?

I work in an MNC and earn Rs 9 lakh a year. I was promoted recently and was provided a car by my company. I can use this for official as well as private purposes. Is this a taxable perk?
- Rajesh Yadav

A car provided by an employer to an employee is a taxable perk if the latter’s salary is more than Rs 50,000 a month. The value of the perquisite depends on the cubic capacity of the engine and whether the employer or employee pays for the car’s maintenance and running cost. If the engine capacity is less than 1.6 litres and the maintenance and running cost are reimbursed by the employer, the value of the perquisite is Rs 1,200 a month. In case the cubic capacity exceeds 1.6 litres, the value of the perquisite is Rs 1,600 a month. However, if the maintenance and fuel expenses are borne by you, a car of less than 1.6 litres engine capacity will have a perquisite value of Rs 400 a month. If the capacity exceeds 1.6 litres, the value is Rs 600 a month. If your employer has also provided you with a chauffeur, another Rs 600 a month will be added to the perk value.

TAX

I have invested in a cumulative bank term deposit for two years. Is the interest taxable? Do I need to report the income earned in the first year even though I will receive it only at the end of the two-year term?
- Pavan Singh

The interest earned on bank balances, fixed deposits and other securities is fully taxable. Most taxpayers are not aware of this rule and fail to report their income correctly. Another misconception is that the interest is taxed only when a bond or fixed deposit matures. In reality, the tax is payable on the interest earned every year even though the investor hasn’t received the income yet. The taxpayer has to include the interest earned on various deposits in his income for the year. Also, he must include any short-term capital gains from non-equity investments, such as debt funds, gold funds and gold. The short-term capital gains on equity investments are taxed at 15%.

Both, my spouse and I, are working. We have bought a house in Vadodara, for which my husband has taken a home loan. Now, we want to buy another house, either in Vadodara or Kerala. Can I take a home loan in my name?
- Maya Anilkumar

Yes, you can take a home loan in your name and it isn’t taxable. In fact, you can avail of tax benefits on the loan, but it should have been taken to purchase or construct a house, not to buy a vacant plot of land.

The repayment of the principal amount of loan qualifies for deduction under Section 80C up to a maximum of Rs 1 lakh. Also, under Section 24, you can claim up to Rs 1.5 lakh as exemption for the interest on the loan. This deduction can be claimed under the head ‘Income from house property’ for a self-occupied house. The full amount of interest can be claimed as deduction in case the house is given on rent.

My daughter lives with me and has recently started working. Can she pay rent to me and claim tax exemption for the house rent allowance (HRA)? What will be the tax treatment for the rent that I receive from her?
- Shivaji Patil

Yes, your daughter can pay the rent to you and claim HRA exemption for the same. The HRA exemption is the least of the following:

• Actual HRA received.
• Actual rent paid minus 10% of basic salary.
• 40% of basic salary (50%, in case you are living in a metro).

However, the rent she pays you will be included in your income for the year under the head ‘Income from house property’. The entire amount is not taxable as you can avail of a standard deduction of 30% for the maintenance of the property. So, if she pays you Rs 8,000 a month, the total annual rent would be Rs 96,000. If you deduct 30% from the gross rent, it will come to Rs 28,800. This amount will be exempt from tax and you would be taxed on the remaining Rs 67,200.

My wife doesn’t have a regular job or salary but earns by taking tuitions and selling insurance. Will her income be clubbed with mine or does she have to file her income-tax return separately?
- Ravi

The money that your wife earns is her personal income, so she will have to file her income-tax return separately. However, she needs to do this only if her annual income is more than the basic exemption limit of Rs 1.8 lakh. For next year, this limit has been raised to Rs 1.9 lakh.

Clubbing provisions apply only in certain cases. If a sum is gifted to a spouse and this money is subsequently invested, the income earned from the investment is clubbed with the income of the person who has gifted the amount. This also applies to property, shares and gold. For instance, if you had given Rs 1 lakh to your wife and she had invested it to earn Rs 15,000 in a year, this money would be deemed to be your income. Similarly, if you had gifted a house to your wife and the property was rented out, the rental income would have been clubbed with your income.

However, only the primary income from the investment attracts the clubbing provision. If the income from the investment (or rent from the property) is also invested, then the income from this investment will not be clubbed. It will be treated as your wife’s income.

MUTUAL FUND

I invested in mutual funds some years ago, but did not show it in the income-tax returns for those years. I have not redeemed the units as yet. Do I need to declare the same while filing the return next year?
- Shailesh Kumar

As you have not redeemed your investment in mutual funds, there is no income (or loss) from the investment. So there is no need to mention it in the income-tax return. However, remember to do so when you redeem the units.

If your mutual fund has paid a dividend, you will have to mention it in the form under the heading ‘Income from other sources’. As the AMCs pay dividend distribution tax, the dividends received from mutual funds are tax-free. So the dividend income you earn will be exempt. Also, if your mutual fund investment during a financial year exceeds Rs 2 lakh, you will have to mention it in the annual information report (AIR Schedule) in the income-tax return. This is important because this information reaches the Income Tax Department from third parties as well, such as banks, mutual funds, brokerages, depositories, etc.

INSURANCE

How does a life insurance policy bought from a post office compare with that from an insurance company?
- Vijay Shankar Jaipal

Postal Life Insurance (PLI) is a low-cost insurance option open only to the employees of central and state governments, armed forces, nationalised banks, public sector undertakings and local bodies, such as municipalities and zila parishads. PLI offers only traditional savings-backed plans and the sum assured is limited to Rs 10 lakh for most policies. It is a good option because the premium is lower than that charged by other insurance companies. Also, historically, the bonus rates for PLI policies have been higher than those for LIC or other insurance companies. The premium paid for a PLI policy is eligible for tax deduction under Section 80C.