Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

HEDGING AGAINST INFLATION

Some smart strategies for preserving and enhancing the all-important purchasing power of your Rupee!

HOW 7% ANNUAL INFLATION CAN IMPACT YOU?

After   Number of Years

5

10

15

20

25

30

Effective Value of   Present Rs.100

71

51

36

26

18

13

Earnings Required   for Present Rs.100

140

197

276

387

543

761

(more…)

EVALUATING TAX WORTH OF YOUR INVESTMENTS!

As a prudent investor compare your effective post-tax return while making your final choice of investment!

The most common mistake an ordinary investor makes in the choice of his investment is in jumping for a higher rate of interest, without taking into consideration the effective after tax return keeping in view the marginal rate of income-tax on his total income. Similarly, it is not uncommon to see an investor in a high tax slab who is unable to appreciate the worth of a tax-free investment, the break-even rate of interest or the pre-tax return of which is in fact much higher than the seemingly low rate of interest attached to the investment.

 Are you prepared to accept the fact that if your income is liable to income-tax in the highest tax slab, i.e. 30.9%, you would be much better off with a 8.8% tax-free return as compared to a 10% return which is taxable? If you are not, the following Illustration should convince you beyond doubt: (more…)

ENJOY COCKTAIL OF EXEMPTIONS!

ITAT holds that taxpayer can claim simultaneous LTCG exemption for investment in house & bonds!

A taxpayer derived long-term capital gains of Rs. 3.40 crores from sale of his ancestral property. Out of the same, he invested Rs. 2.60 crores in a new house for which he claimed exemption under Section 54F of the Income-tax Act. He also invested Rs. 50 lakhs in the specified REC bonds for which he claimed exemption under Section 54EC.

The Assessing Officer denied claim for exemption in respect of the aforesaid bonds investment of Rs. 50 lakhs under Section 54EC, on the ground that since the taxpayer had availed exemption via investment in house under Section 54F, the balance amount could have only been deposited under the Capital Gains Account Scheme for further investment in house and not for any investment in REC capital gains bonds.

The Commissioner (Appeals) allowed the taxpayer’s claim against which the Department preferred an appeal before the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT). (more…)

HOUSING INTEREST, HOW INTERESTING?

Deduction for interest on housing loan being allowable on ‘payable basis’ can be claimed, though actually not paid!

Today’s Tax Clues deals with some very interesting issues raised by readers in relation to deduction for interest and repayment of housing loan.

Query:  I am desirous of investing in a house and need a Housing Loan of Rs.20,00,000.  An institutional loan would mean adhering to a strict schedule of interest and installment payments and hence I am considering the option of availing such loan at 7.5% interest per annum from my Senior Citizen father, who would have no objection in granting me accommodation in payments so as to suit my liquidity convenience.  Being in the top tax bracket, I would like to know if I can avail tax deductions for housing interest and installment payments, if they are not actually paid during the year but deferred for payment in the later years as per my convenience.    

                                                                               -Swapnil Vyas (more…)

TUITION FEES ELIGIBLE FOR TAX DEDUCTION

On a rational interpretation, tuition fees paid to your child’s coaching class should also qualify for deduction u/s. 80C!

So your children are back to school and college after the summer break? As you pay their tuition fees for the new term, do keep in mind that Section 80C of the Income-tax Act offers some attractive tax breaks for your children’s education too! The Q & A presentation hereunder discusses some interesting issues in this regard. (more…)

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