Tax Column

Yes, HUF can claim deduction in respect of life insurance premium paid on behalf of one of its member. It is permissible in case of Hindu Undivided Family that policy could be taken on life of any member of the family and claim deduction of premium under the Income Tax Act. However, in any case, the insurance premium, which would be allowed as deduction, should not exceed 10% of the sum assured. For your information, the deduction under section 80C of the Income Tax Act is restricted to Rs.1,50,000 per annum.

I am an individual. I have four residential houses in India.One house is occupied by my family and the other three houses remain vacant and used by us occasionally for living. I was told that although three houses remain vacant,I still have to offer deemed rent on these houses in my tax return. I have not done it for last 4/5 years. Can you explain me the law and what action should I take to rectify my mistake?

Under the provision of the Income Tax Act, upto the financial year 2018-19, an individual can claim exemption in respect of one house only as self-occupied.For the other three houses, if remained vacant, the fair market rent in respect of these houses that would have been fetched if you could have given on rent, has to be offered to tax as deemed rent under section 23 of the Income Tax Act. So upto the financial year 2018-19, i.e. assessment year 2019-20, you should have offered deemed rent for three houses. The returns upto the financial year 2017-18 cannot be revised now. Therefore, it could be rectified only if the Income Tax Officer reopens your assessment. For the current assessment year, you offer yourself voluntarily in the return of income itself and pay taxes accordingly. However, from the amount of deemed rent, municipal taxes paid and 30% of deemed rent would be available for deduction. From the financial year 2019-20, the exemption is now available in respect of two houses. Therefore, from the current financial year onward, you have to offer deemed rent in respect of two houses of your choice.

I am an individual. I earn interest, capital gain, rent, etc. Am I required to mention details of assets and liabilities in IT return for the current financial year 2018-19 i.e. assessment year 2019-20? If so, what type of details of assets and liabilities do I have to disclose and at what value? My income for the current financial year would be around Rs.70 lakh.

Individuals/HUFs are required to furnish details of assets and liabilities at the yearend only when taxable income exceeds Rs.50 lakh. Since your income exceeds Rs.50 lakh, you are required to disclose all your assets and liabilities. Schedule AL wherein details of assets and liabilities are to be furnished and is available in ITR 2I and ITR 3. You should provide details of immovable properties, jewellery, vehicles, bank and cash balances, etc. at the year end. Further, you are also required to disclose address of the immovable properties and description of movable assets. The assets and liabilities are required to be reported at their cost price. Thus, it is mandatory for every individual/HUF having income exceeding Rs.50 lakh to disclose their assets and liabilities in Schedule AL of the return.

I am a lady. I have not filed my tax return in earlier years as my income was always below the taxable limit. During the current financial year 2017-18, i.e. assessment year 2018-19, I have earned long term capital gain of Rs.1 crore. I have invested this capital gain in a new house and as such the entire capital gain is exempt under section 54F of the Income Tax Act. Therefore, for the current financial year, my taxable income would be nil. Do I need to furnish Income Tax return for the assessment year 2019-20?

Technically and as per the provision of the law, since your taxable income for the financial year 2018-19 is nil, i.e. below the exemption limit, it is not mandatory for you to file return of income under section 139 of the Income Tax Act. However, my advice to you is that you should file the return so that you donRs.t invite any inquiry or reopening notice. As per section 285BA, prescribed authorities shall file a statement of financial transactions with the Income Tax department wherein details of persons are furnished who entered into transactions of sale or purchase of immovable property and the transaction value or stamp duty value of such property is Rs.30 lakh or more. In your case, both sale consideration in respect of your old house and purchase consideration in respect of new house exceed Rs.1 crore. Therefore, there are chances that both your transactions would be reported to the Income Tax department. However, when the Tax Department does not get the corresponding information from the taxpayer, then the Income Tax Department will issue an inquiry notice to identify the reasons for not filing the return which will compel you to file the return subsequently. Therefore, to avoid this type of future inquiry, although you are not liable to file return of income, it is better to file the same, showing both sale and purchase transactions.

What are the consequences of not filing return of income by individuals for assessment year 2019-20.

Kindly note that it is mandatory for individuals to file return of income if their income exceeds the exemption limit. Therefore, if your income exceeds taxable limit, you are under legal obligation to file return of income. The outer limit to file the return for assessment year 2019-20 is March 31, 2020. The consequences for not filing the return are levy of additional fees and prosecution. Under section 234F of the Income Tax Act, fees would be levied if you do not file your return of income on due date prescribed in Section 139(1). The amount of fees varies from Rs.1,000 to Rs.5,000 You are also liable for prosecution under section 276CC of the Income Tax Act with rigorous imprisonment for a term which may vary from three months to seven years. So, it is advisable to file the return of income preferably before the due date.