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Interest-free loans to family members from your own funds can go a long way to lawfully reduce your tax burden!

            “A Rupee saved is a Rupee earned,” says the well-known dictum. In the context of the current Indian Income-tax Law, one could modify this saying to read as “a Rupee saved from tax, equals one and a half Rupees earned.” Every Monday since August, 2010, ‘AM Tax Clues’ has endeavored to show its readers how to save their Rupee from tax, lawfully of course. And after 173 write-ups during the 40 months until date, as your columnist signs off and concludes this column today with a great sense of joy and fulfillment, a big thank you to dear readers, who have not only read, admired and appreciated this column, but also shared their critical feedback and meaningful response from time to time!

             In a fitting tribute to the inborn Amdavadi instinct of lawfully saving tax, discussed hereunder are replies to two very interesting reader’s queries: (more…)


Managing your money requires more skill than making it! Four investment jingles you must learn for happy investing!

   Investment planning is both an art and a science. It is a science, since it is based on sound information, tested principles and logical statistics. However, it is also an art, since it involves intelligent analysis, judicious decision-making and a sixth sense of visualization. The key to successful investment planning lies in making the right choice of investments which best suit your requirements.

   What are the important considerations which you as an investor must keep in mind while planning your investment portfolio? Security, yield and liquidity are the three guiding stars which should influence any investor in making his decision. (more…)


Else, it will drive them cynical in believing that paying taxes honestly is not worthwhile, says Allahabad High Court!

“Speedy and affordable justice is the requirement of the day. But it cannot be achieved until the executive, including taxman, discharge their duties faithfully and honestly within the four corners of law.” – Allahabad HC in Vijay Agrawal vs. CIT (2013)

            In a recent landmark judgment, the Allahabad High Court has championed a worthy cause for the taxpayers by holding that, “An honest taxpayer should not be subjected to unnecessary harassment and an action not warranted in law, which can be of very serious consequence to the taxpayer. If this is allowed to remain without correction, such harassment and browbeating of an honest taxpayer will otherwise drive even such honest tax-payers to become cynical and lead to a situation where taxpayers will get a feeling that paying taxes honestly is not a worthwhile exercise and that tax authorities are a menace to the society, rather than being representatives of the State for enforcing the tax provisions.”

             In the facts of the case of Vijay Agrawal vs. Commissioner of Income-tax which recently came up before the Allahabad High Court, a search had been conducted at the premises of a taxpayer during which cash of Rs. 25 lakhs was seized. The taxpayer succeeded in the block assessments and the said amount of Rs. 25 lakhs thus became refundable to him. However, the said amount was not refunded to him on the ground that there were demands outstanding against a third party who was also named in the search warrant. The taxpayer claimed that he had no relation with the said third party and the fact that there were demands outstanding in that case did not mean that his refund could be blocked. No order was passed on the taxpayer’s application for refund inspite of repeated reminders, which finally provoked the taxpayer to approach the High Court for remedy through a writ petition. (more…)


Liberal deductions provided under the I.T. Act in respect of expenditure for medical treatment & maintenance!

 The Income-tax Act provides for special deductions in computing the taxable income of a taxpayer who is disabled or who is required to incur expenditure for the medical treatment, training or rehabilitation of a disabled dependent or any amount deposited for the maintenance of such disabled dependent.

Similarly deduction is also allowed to a taxpayer who is required to incur any expenditure for the medical treatment of specified diseases or ailments, either for himself or a dependent relative.


            Under the provisions of Section 80U of the Income-tax Act a resident individual suffering from a permanent physical disability (including blindness) or mental retardation, is allowed a deduction of Rs.50,000 in the computation of his taxable income. (more…)


Special concessions are offered in case of one house property occupied by the taxpayer for his own residence!

Under the Income-tax Act, ‘income from house property’ is a separate head of income, under which the ‘annual value’ of a property, consisting of any building or land appurtenant thereto, of which the taxpayer is ‘the owner’ is chargeable to tax. If, however, a house property is occupied by the taxpayer for the purposes of his business or profession carried on by him value of such property is not chargeable to income tax.

The income from house property for purposes of income tax is based on the ‘annual value’ of the property. The concept of annual value is in effect not a real but a notional concept, since it is defined as ‘the sum for which the property might reasonably be expected to let from year to year.’ For purposes of computation of income under this head, house properties have been classified into the following two categories:

  •  Self-occupied Property (SOP);
  •  Let-out Property (LOP). (more…)
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