Money Today experts answer your personal finance queries, from tax to insurance to investments.
Q. My employer has included leave travel allowance (LTA) in my salary for the current financial year. I had availed of a 10-day leave to travel and hired a car for Rs 32,000 during the holiday. Can I claim LTA by producing a bill for this trip and avail of the tax exemption? - Deep Narayan, Shimla
A. Yes, you can claim LTA exemption for travel expenses in India. The tax rules provide for an exemption only for two journeys performed in four calendar years. It may be noted that only the actual fare amount is eligible for exemption and no other travel expenses are exempt. The LTA would be exempt for actual fare incurred or A.C. first-class rail fare through the shortest route from the place of origin to the destination, whichever is lesser. In case the place visited is not connected by train but connected by recognised public transport system, then the first-class or deluxe class fare by shortest route, or the amount spent on travel, whichever is lesser, will be exempt. If the place is not connected by public transport too, then AC first-class rail fare through the shortest route assuming the journey had been performed by rail, or actual fare paid, whichever is lesser, will be exempt. Also, remember that you can claim the LTA only once a year.
Q. Is the tax deduction limit of Rs 2 lakh for repayment of interest on a housing loan available to an individual or on the basis of property? If the property is co-owned in a ratio of 60:40 and a housing loan has been taken, can both claim a deduction for the entire interest amount of Rs 2 lakh? Or will they have to share this tax benefit in the proportion of co-ownership? Does one need to mention the details of the co-ownership while claiming this deduction? - Purnima Mishra, e-mail
A. The tax computation is different for self-occupied and rented property. The earlier limit was Rs 1.5 lakh, but this was extended in this year's Budget. From this year onwards, in case of a self-occupied property, the interest deduction is allowed to each of co-owner up to Rs 2 lakh per year and Rs 30,000 per year for repairs. But in case of rented property, the income from house property would be computed first as it is owned by one owner. Then, the profit/loss from particular house property would be distributed among co-owners as per the owning ratio. It may be clarified that the ownership ratio is determined on the basis of contribution by co-owners in the house property and not through the ratio mentioned in the sale deed for tax-benefit purposes. Also, please note that the interest deduction limit of Rs 2 lakh is applicable only for a self-occupied property, not if the property has been rented out. Assuming the house property owned by co-owners is self-occupied, each of the co-owners are eligible for home loan interest deduction of up to Rs 2 lakh under Section 24 (b).
Q. I submitted some of my stocks of a company listed on the Bombay Stock Exchange during a buyback offer and made a short-term gain. How will it be taxed? Can I set it off against short-term losses from shares for which I had paid the securities transaction tax (STT)? - Vinay Sharma, Chennai
A. Usually, short-term capital gains arising out of such transaction are added to your income and taxed at the slab rate applicable to you. But in your case, the short term capital gain on non-STT transaction can be set off against the short-term loss of STT equity transaction.
Q. I have an outstanding balance of Rs 82,000 on my credit card. I pay a little more than the minimum amount due every month. A friend suggested that I pay the remaining balance by taking a personal loan. Is this a better option? The bank has said that I can convert the balance amount into a loan and pay it in EMIs. If I do so, will it affect my credit score? - VN Patil, Kanpur
A. Paying the minimum amount due and not the total outstanding means that you are categorised as a current non-delinquent but interest-paying customer, called a revolver in banking terminology. Repaying the entire credit card outstanding by taking a personal loan is likely to reduce the overall interest you will pay as the personal loan rates will be lower than card revolver rates.
Q. I am a 55-year-old doctor and currently earn about Rs 1.2 lakh a month. I wish to buy a flat in Delhi for about Rs 40 lakh. I will need a home loan of Rs 12 lakh for a period of about 10 years. Can I avail of a bank loan, or does my age make me ineligible for taking a home loan? - Pranay Raj, Delhi
A. Age often determines the number of years left for earning and impacts the home loan tenure and the EMIs too. The maximum tenure for a housing loan is normally 20 years or restricted by the retirement age. Assuming that you run your own practice, it will not be an issue for you to take the loan. However, if you plan to retire before the age of 65, then there could be an impact on your monthly savings and you can restrict the loan tenure to your retirement.
Q. I plan to buy a flat and was advised by my advocate not to do so in an individual capacity but jointly with a family member. However, I do not wish to include my wife's name in the flat's ownership. Can I buy the house by including the name of my 7-year old child as I want to give it to him anyway at a later date? My advocate does not recommended this due to legal complications that it could entail. Can you shed some light on the matter? What can be the possible legal issues in naming a child as a joint owner? - MK Venu, Cochin
A. There is a reason why you rarely find the names of minors included as joint owners of a property. Adding the name of a minor as a co-owner may lead to complications in future, especially during a resale. This is because the law must protect the minor's interest. There is a potential claim that can come from the minor at a later stage if the property is sold while he is a minor. Hence, one will find it difficult to sell the property. Thus it is advised to have the property registered either in your individual name or jointly with your spouse, or some other family member. Your concerns of ensuring that the property is passed on to him are understandable. For a smooth succession policy, you can also make a Will and mention the beneficiary to whom the property wil belong in case of an unforeseen event. This should also protect your child's interest.
Q. My wife suffered a fire-related accident at home and has been admitted to a hospital. The cost of the treatment will be about Rs 10 lakh. I have multiple insurance policies. How can I claim from these companies as the hospital said it will provide only one discharge form? - Rohit Shukla, Ranikhet
A. People with multiple health insurance policies can file a claim with all their existing insurers. In case the cover of your base policy is more than Rs 10 lakh, you should use cashless benefit of the base policy. But if the claim amount is more than the cover of the base policy, you may use the cashless benefit of your base policy up to the maximum limit and then get the rest of the claim amount reimbursed from the second insurer. Remain transparent and inform both the insurance companies of the multiple policies held by your wife. In order to have an easier claims process, make sure you keep all the original medical bills and discharge summaries. You can submit a photocopy of the original bills to your insurers when they ask for it.
Q. I have been paying premium for the past 14 years on a mediclaim policy for my family, which includes my parents. I forgot to pay the premium that was due in July and it came to my notice in October this year. When I requested the insurer to allow me to continue with the policy, it refused. I told the officials that I had not been sent a reminder, which I usually get, but to no avail. Now, the company is demanding a pre-medical check-up for my parents. Will this help me continue with the policy? - Nishant Saxena, Gandhinagar
A. Insurance companies usually send a notice to the policyholders reminding them of the premium due date and also provide them with 30 days of grace period for paying the premium. As you have crossed the grace period of premium payment, your insurer might not be able to continue with the existing policy. However, as an exception they may choose to continue your policy based on fresh underwriting of the risks involved. Your insurance company has agreed to continue on the basis of good health status of the insured and that is why they have requested for a pre-medical check to get the good health status report. You must also note that any medical emergency or medical treatment undertaken during the period by either you or your family members when your policy stayed lapsed would have to be freshly underwritten and may be excluded from the policy. As each insurance company is bound by its specific underwriting policies, you should check the policy documents of your insurance provider to determine if there would be any change in the benefits accrued till now. Make sure you understand the changes before buying the insurance.
DO YOU HAVE QUERIES ON TAX, INSURANCE, INVESTMENTS?
Anil Rego, CEO, Right Horizons, has tackled financial planning; Antony Jacob, CEO, Apollo Munich Health Insurance has answered insurance queries; Mohan Jayaraman, MD, Experian Credit Information Company takes on loan-related queries & Sudhir Kaushik, Co-founder and CFO, Taxspanner.com, has provided tax solutions. Log on to moneytoday.in to submit your questions.