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Query Corner: Tax - (18.05)
May, 18th 2010

Our expert helps you understand the complexities of tax in this weekly column.

I was offered 800 shares of the company under Esop at Rs 994.85 per share in November 2006. I applied for 500 shares on December 25, 2009. However, the company charged me Rs 6,06,370 instead of Rs 4,97,425. The finance minister had abolished FBT. Please let me know whether the extra amount of Rs 1,08,945 is refundable. If so, what should I do?
B Lama

Note that Esops are now taxable as perquisites. Difference between the fair market price as on the date of exercise of the option and the exercise price is considered as taxable perquisite. The differential amount would most likely be the amount of tax on such perquisite and, if indeed so, it will not be refundable to you.

I have purchased a flat on Power of Attorney (POA) basis from the original allottee in May 2008. The said flat is under construction and is being built by Ludhiana Improvement Trust (LIT) under self-financing scheme. I am paying residuary half-yearly instalments to LIT since the date of purchase from the allottee. LIT is issuing me receipts in the name of original allottee as transfer in my name will happen only after the payment of all pending instalments. Possession will be given to me after completion (possibly in May-June 2010). Can I claim 80C deduction on principal payment, along with House Rent Exemption u/s 10 (13A), on the basis of the fact that I am in rented premises at present and my owned property is under construction?
Neeraj Gupta

Deduction under Section 80C too will start from the year in which construction of the property is complete. Prior principal payments will not be eligible for deductions, deferred or otherwise. Yes, you can continue claiming HRA exemption till the time you occupy the new house.

I started investing in mutual funds through the SIP route under growth option. After the lock-in period of three years, I have now started realising the investments. The realisations are more than the original investments, which means there is an appreciation. Is this appreciation taxable as capital gains? If so, how to save the tax?
B r Nagaraja

You seem to have invested in ELSS as you have mentioned about three-year lock-in period. These are considered as equity-oriented mutual funds. The gains arising on redemption of units in ELSS are exempt from income-tax.

In case I transfer Rs 10 lakh to my wife as gift, will the income (say by way of interest on FD) on the said amount accruing to my wife be clubbed in my income u/s 64(1) or any other provision of the Income-Tax Act?
Deven Khakhar

Yes, income earned by your wife from the assets gifted to her by you will be clubbed in your income under Section 64.

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