T. Banusekar

I am a resident but not ordinarily resident in accordance with the Income-Tax Act. I have funds deposited in India in NRE and NRNR accounts.

The interest on these deposits is credited quarterly to my NRE savings account. Some of these deposits are due to mature in 2006 and others in 2007. Will the interest from these NRE and NRNR accounts be taxable in India? Krishnan Kumar

Interest on money standing to the credit of an NRE account in any bank in India can be claimed as exempt under Section 10(4)(ii) if the individual is a non-resident in accordance with the Foreign Exchange Regulation Act.

A person who is a non-resident or a resident but not ordinarily in accordance with the Income-Tax Act can also claim exemption under Section 10(15)(iv)(fa) in respect of interest on deposits in foreign currency where the acceptance of such deposits by the scheduled bank is approved by the Reserve Bank of India.

You will therefore be able to get the exemption in respect of interest from the deposits referred to by you if you satisfy the conditions stated above.

I had invested Rs 2,50,000 in SIDBI bonds. I redeemed them in 2002. SIDBI had sent a letter to me along with a form for non-deduction of tax at source to my residence address.

Since I am a non-resident and there was nobody at that address, the letter was not redirected to me. I received a reminder letter in 2005 and sent the certificates for redemption. SIDBI has credited Rs 8,50,000 to my bank account after deducting Rs 1,50,000 towards tax.

Will it be possible for me to now take credit for the tax deducted on the basis of the TDS certificate in Form 16A which shows that the tax was remitted on February 1, 2002? Thomas Oommen

From the facts it is clear that the tax was deducted even in the financial year 2001-02. The income it appears will also be relatable to that year.

This conclusion is arrived at on the basis that tax has been deducted at source by SIDBI even in that year which means that this would have been done on the basis that the income has already accrued. The nature of income it appears would be in the form of interest.

Interest from such bonds would be assessable under the head "Income from other sources".

Income under this head is assessed based on the method of accounting regularly employed by an assessee being the cash or the mercantile system of accounting.

You may note that different methods of accounting may be followed in respect of different sources of income. You can therefore choose to follow the cash system of accounting in respect of the interest and claim credit for the TDS by offering the income in the year of receipt.

You may note that credit for the TDS will be allowed in the year in which the income is assessable irrespective of the year that is borne in the certificate. You may also note that the time to file a return for the assessment year 2002-03 (financial year 2001-02) has already expired and therefore you would face needless difficulty in trying to offer the income in that year and to claim credit for the TDS in that year.

I sold a long-term capital asset on December 10, 2005. I invested the capital gain in NABARD bonds January 4, 2006 for saving the tax by claiming exemption under Section 54EC. I understand that the Act has been amended by the Finance Act, 2006 to exclude investment in NABARD bonds from being eligible for exemption. What will be the position in respect of the investment I made in January 2006? Will I be able to claim the exemption? Ulhas Latkar

You are correct in your understanding that the Finance Act, 2006 has made an amendment which provides that investment in the bonds of NABARD, the National Housing Bank and SIDBI will not qualify for exemption under Section 54EC.

The amendment however only provides that the exemption will not be available in respect of such bonds issued on or after April 1, 2006. In your case the investment has been made in bonds issued even in January 2006. You should therefore have no difficulty in claiming the exemption under Section 54EC in respect of the investment made by you.

I am looking to acquire a property and for this purpose I am planning to take a housing loan of Rs 21 lakh. The loan will be taken with either my father or my younger sister as a co-applicant. In such a case will I be eligible for the tax benefits in respect of the housing loan where the property will be owned by me, though my father/sister will be a co-applicant? Prasath K

The fact that your father or sister will be a co-applicant to the loan will not in any way affect your claim for tax benefits in respect of the repayment of housing loan and the interest thereon so long as you are the owner of the property and the repayment is made by you from out of your income.

I am in receipt of House Rent Allowance from my employer. I live with my parents who are not employed, but they own the house. If I were to pay rent to them can I claim a tax exemption? Ankur

Tax exemption is available under Section 10(13A) in respect of house rent allowance if rent is paid subject to the limits specified in the Section.

There is no prohibition on the payment of rent to your parents and you will be eligible for the exemption under Section 10(13A) in respect of the rent paid. You may also note that the rent will be the income of your parents and will be assessable under the head "Income from house property" in their hands.

Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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