Tax Exemption , 
rental income, 
Tax
Tax Exemption , rental income, Tax

Cannot Claim Tax Exemption On Amount Paid To Family

If the family members are among defined relatives, they will be exempted from paying tax on money received from you. Encashment of leave is exempt up to Rs 25 lakh, subject to maximum of 10 months accumulated leave received on retirement or resignation. If the property is let out, the employee will have to provide the details of rental income to the employer for computing the income from house property
Q

I earn Rs 9.50 lakh per annum and give about Rs 2.50 lakh to my family. Can I claim tax exemption on this amount?

A

What you are doing is application of income earned and not an expenditure incurred to earn this income. There are no tax benefits for such application of income. This is nothing but gift to your family members.

If the family members are among defined relatives under Section 56(2) of the Income-tax Act, 1961, they will be exempted from paying tax on such gifts, which are otherwise taxable if the aggregate of the gifts exceeds Rs. 50,000 for each such person in a year.

Q

I have resigned from one organisation and have joined another. I have received an amount of Rs. 50,000 as leave encashment. Will this amount be taxable, or can I claim it as an exemption under Section 10 of the Income-tax Act, 1961?

A

Encashment of leave is exempt under Section 10 up to Rs 25 lakh, subject to maximum of 10 months accumulated leave received on retirement or resignation. For central and state government employees, the full amount of leave encashment is exempt, without any limit.

This limit of exemption is available for all the employments taken together and not for each of the employer. Please note that the exemption is not available for encashment of leave availed by you during your employment. So, the leave encashment received on your resignation will be fully tax-free in your hand.

Q

Can an employer can give full rebate of interest on housing loan (i.e., more than Rs. 2 lakh) to an employee in his/her Form 16? Also, is it mandatory for the employer to show the rental income also in the employee’s Form 16?

A

In case the property is let out, the employee will have to provide details of the rental income to the employer for computing the income from house property, as loss beyond Rs 2 lakh cannot be adjusted against the salary income for the purpose of tax deduction at source (TDS).

The employer will, therefore, ask for the rent agreement or any proof to verify the amount of rent received by the employee. However, while filing the income tax return (ITR), the employee can claim the full interest while calculating the house property income, but any loss beyond Rs 2 lakh will have to be carried forward for set-off in subsequent years.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)

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