I may opt for voluntary retirement this year. When I do so, I will get both gratuity and pension. What will be the tax incidence on both? Can I reduce my tax liability on the total amount? How?
Assuming you are a private sector employee and have not received gratuity from your previous employer, the gratuity at the time of voluntary retirement could be claimed as exempt. The maximum exemption that can be claimed is Rs 10 lakh. However, the pension received will be taxable as ‘salary income’. To reduce your tax liability, you may consider commuting the pension. One-third of the commuted value can be claimed as exempted from tax. You may also invest in specified tax saving instruments under Section 80C (maximum deduction available is Rs 1 lakh) and notified infrastructure bonds under Section 80CCF (maximum deduction available is Rs 20,000) of the Income Tax Act.
My company gives interest-free loans to its employees. I want to take this loan. Will it be treated as a perquisite for taxation? Is there any type of loan which is exempted from being treated as a perk?
Interest-free loans, which are given to employees, are considered as a perquisite and are taxable as salary income in their hands. The notional rate of interest for computing the value of perquisite will be the rate charged by the State Bank of India, as on the first day of the relevant tax year for loans given by the bank for the same purpose on the maximum outstanding monthly balance. However, if an interest-free loan is taken for medical treatment of specified diseases, it will not be considered a perquisite. And, if the loan is provided to treat any of these specified diseases, but reimbursed to employees under any medical insurance scheme, the exemption will not apply. Further, if the loan amount is petty (not exceeding Rs 20,000), there will be no perquisite.
I own two properties in Bangalore. One is self-occupied, while the other is rented out on an 11-month contract, earning Rs 45,000 a month. How will the amount be taxed? Does one enjoy a tax benefit on let-out properties?
The annual value of a self-occupied property is considered as nil, and no other deductions — except for interest payable on an on-going home loan, if any — on the property can be considered. The maximum deduction allowed for the interest is Rs 1.5 lakh, subject to fulfilment of the prescribed conditions. The let-out property will be taxed at its fair rental value, which is the gross expected rent from the property, or the actual rent received from letting out, whichever is higher. Against this rent, you can claim a deduction on account of municipal taxes paid for the property. You can also claim a deduction of flat 30 per cent of the annual value (that is rent minus municipal taxes). There is no ceiling for claiming an interest deduction subject to fulfilment of conditions.
The writer is a tax partner at Deloitte, Haskins & Sells. Views expressed are personal, and not of the company. Send your queries to yourmoney@bsmail.in
