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Chat Transcript

Balwant Jain

CA & CS , Bombay Oxygen

How to do tax planning for the current year


Questions Answered


guest: How is Profit from Sale of IPO Shares (First Day) are treated in Income Tax

Balwant Jain: The profit on sale of shares in IPO is generally taxed under the head capital gains. However depending on the volume, frequency and source of money invested the same can also be treated as business profit. If the volume is very large and money is borrowed the same can be treated as business income. So it will depend on the facts of the case and no clear yardstick can be specified.

guest: Which is better option ELSS or PPF ?

Balwant Jain: Both the products cater to different people. Which product is better for you will depend on your risk profile, your time horizon for investments. As the lock in period for ELSS is three years but the money in PPF generally gets locked for 15 years but the rate of interest on PPF is fixed where as the rate of return on ELSS will depend on the returns on equity markets in general. The returns under ELSS have been better than those under PPF for longer tenure. The returns under ELSS may be negative during its fixed tenure but if you hold it for longer period and wait for the favorable market period, the returns on ELSS may be in the range of 12% to 16%. So take your call. Money in PPF can be invested in the name of spouse, self and children but under ELSS the same has to be invested in your own name. PPF can be an excellent tool for retirement planning as well as for capital building for your children whereas the ELSS may help you in wealth creation over the time. If you are young and have risk appetite, invest in ELSS.

guest: what are the proposed tax slabs for fln yr 2017/2-18

Balwant Jain: The tax slabs are upto 2.50 lakhs exempt for average individual and 3 lakhs for person above 60years for persons above 80 years the exemption limit is 5 lakhs. For income between exemption limit and 5 lakhs the rate is 5% .Between 5 lakhs and 10 lakhs the tax rate is 20% and above 10 lkahs it is 30%. The income tax computed above shall be increased by a education cess of 3%. In case the total income exceeds Rs. 1 crore a surcahrge @ 15% shall also be levied.

guest: My gross income is 840000 i am govt employee please advise me for tax planning my age is 52 no hba taken so dar

Balwant Jain: For you there are the options to save taxes under Section 80 C along with contribution towards NPS upto the limit of Rs. 1.50 lakhss. Additionally you can claim deduction under section 80 CCD (1A) for an additional amount of Rs. 50,000/- for contribution towards NPS account. I understand you are covered under Provident fund contributions GPS and NPS is not mandatory for you so you can open an NPS account and avail the additional tax benefit in respect of contribution towards NPS for extra Rs. 50,000. Even if you already have an NPS account, you can contribute over and above the basic limit of 1.50 lakhs for various items under Section 80 C and 80 CCC. HBA i understand is home buying advance. Buying a house for tax saving is not longer advisable as the tax laws have been amended to restrict the loss under the head income from house property to Rs. 2 lakhs for all the proprieties taken together.

guest: What should be done for interest on multiple house loans

Balwant Jain: As per the amended law, the loss under the head income from house property which can be set off against other income has been capped at Rs. 2 lakhs and the absorbed loss shall be carried forward for set off against house property income in next 8 years. It is not that the interest on loan for multiple houses is not allowed. For self occupied house there is limit of Rs, 2 lakhs for other properties there is still no limit for allowance for interest on home loan. The restriction is on overall loss under the head income from house proeprty. So in case your rental income is sufficient to take care of your home loan interest, the interest can be fully claimed. So outside the four walls of the law nothing can be done. If you have funds invested which are not giving you very high returns, you can contemplate repaying the home loan partly so as to ensure that the loss under the head does not exceed Rs. 2lakhs as the probability of carried forward loss in subsequent year is very low against the house property income.

guest: Keeping market volatility in mind should one invest in ppf even when one has also invested in elss sip or should one increase the sip for long term gains?

Balwant Jain: Please refer to the first question. In case you have sufficient time with you, you can continue to invest in SIP in ELSS. Doing SIP for equity investment is done for the purpose of dealing with volatility in the market.

guest: I wanted to understand tax implications of ESPP for Indians for shares listed in US? I am ROR of India working in US company in India. I get 10% discount in case of ESPP. I want to know what taxes will I have to pay ? I plan to sell the shares after 5-10 years. Will I have to pay income tax when I get shares ? What about the tax when I sell ? Also, what rules will be applicable (India or US) ?

Balwant Jain: Tax on ELPP shall be levied at two stages. At the time of allotment of shares the Company will treat the difference between the market value and the price at which you get the shares as perquisite and tax will be deducted at the time of allotment of shares. Since you are a resident in India, the Indian tax law will apply to you on sale of ESPP at the same time you may have to pay taxes in US also on the profits made on sale of such shares subject to availability of benefits available under double Tax avoidance agreement between India and US. The tax shall be levied on the difference between the sale price and the market price on the date of allotment/exercise of option..

guest: For Salar class, housing loan interest component was big relief, starting this financial year interest restrictions (irrespective of multiple properties) for let out 2L. Any other suggestions?

Balwant Jain: Please note still there is no restriction on interest allow ability on let out property. The restriction has been imposed on the limit upto which the loss under the head income from house property can be claimed. So as long as the difference between 70% of the rent received and interest paid on home loan does not exceed Rs. 2 lakhs and you do not have any other home loan, the full interest paid on home loan enjoys the tax benefit. In case you have surplus funds or funds invested on which return is not so high, you can contemplate repaying part of the loan so as to bring the loss under the head to Rs. 2 lakhs per year.
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