Tax Tips

Salaries	House Property	Cap Gains
Dearness Allowances Employers contribution to Provident Fund Commuted pension Accrued balance of Provident Fund Medical facility Retirement benefit Relief Free Refreshment / Free   Telephone Petty Loans	More than one self occupied     house Interest on loan for house     property	Long term capital gains Capital gain on Residential house     property Exemption on purchase of agricultural     land Exemption from capital gain Short term capital asset Long term capital asset Short term capital gain Computation of short term capital gain Computation of Long term capital gain Taxation on transfer of listed securities

Dearness Allowances

To minimise the incidence of tax on house Rent Allowance, gratuity and commuted pension the terms of employment should include Dearness allowance and Dearness Pay to form part of basic salary.


Employer's contribution to Provident Fund

Tax on employer's contribution to PF will be lesser if Dearness allowance forms part of basic salary.


Commuted pension

Uncommuted pension is always taxable so it is better to get the pension commuted


Accrued balance of Provident Fund

An employee being a member of a recognized PF who resigns before completing the continuous 5 years service, should ensure that he joins a firm which maintains recognized PF to get the accrued balance of the PF with the former employer to get exempted from tax.


Medical facility

Medical allowance payable in cash is taxable and employee should go in for free medical facilities instead of fixed medical allowance.


Retirement benefit

Tax on retirement benefits like gratuity, commuted pension accumulated balance of unrecognized PF is lower if they are paid in the beginning of the financial year.


Relief

Avail the benefit of relief under Section 89(1) for arrears wherever possible and beneficial.


Free Refreshment / Free Telephone

Perquisite in respect of free refreshment during office hours, free residential telephones, providing use of computer / Laptop gift of all movable assets by employer after using for 10 years or more are not taxable and employees can claim this benefits without adding to their tax bill.


Petty Loans

Any loan taken from the employer for medical treatment in respect of specified diseases or any loan not exceeding Rs.20000 in the aggregate is not a taxable perquisite.So it is beneficial to avail such loans.



More than one self occupied house

If a person has occupied more than one house for his own residence, only one house of his own choice is treated as self-occupied and all other houses has deemed to let out.Care should be taken to make a proper choice in order to minimise the tax liability.

Interest on loan for house property

Interest on loan is deductible only if a loan certificate is produced from the financial institution.Interest payable out of India is not deductible if the tax is not deducted at source. Care should be taken to deduct tax at source in order to avail exemption under Section 24(1)(vi).


Long term capital gains

Long-term capital gains bear lower tax, hence tax payer should plan to transfer their capital assets normally after 36 months of acquisition (12 months in some cases)


Capital gain on Residential house property

Capital gains arising from the sale of residential house property can be avoided by purchasing of another house (even out of India) within the specific period under Sec 54.


Exemption on purchase of agricultural land

To avail exemption under Sec54B and 54D it should be ensured that the investment in new asset be made only after effecting transfer of capital assets.


Exemption from capital gain

Newly acquired assets should not be transferred within 3 years from the date of acquisition to avail exemption under Sec54, 54B,54D,54EC,54F and 54G.


Short term capital asset

A capital asset held by an assessee for not more than 36 months is termed as a short term capital asset. However in the case of shares of a company, listed securities, units of UTI or mutual fund, the above period shall be reckoned as 12 months.


Long term capital asset

Any asset other than short term capital asset (i.e.,) held for more than 36/12 months, as the case may be.


Short term capital gain

Capital gains arising from the transfer of short term capital asset is a short term capital gain.


Computation of short term capital gain

The net sale proceeds is reduced by cost of acquisition and/or improvement to arrive at short term capital gain.


Computation of Long term capital gain

The net sale proceeds is reduced by indexed cost of acquisition and/or indexed cost of improvement to arrive at Long term capital gain.


Taxation on transfer of listed securities

Long term capital gains are generally taxable @ 20%.In the case of listed securities, assessee has an option to tax long term capital gain @ 10% without indexation. Exemption under sections 54, 54EC, 54ED and 54F are available.