Hold on to new house for 5 yrs

■ The aggregate of the deductions allowed in the preceding years will be deemed to be the income of the assessee for the previous year in which the house property is transferred.

QI am writing this letter on behalf of my father. My father is a senior citizen. His source of income is family pension and interest on fixed deposits. Please advise if he has to pay advance tax on the income received. I have checked the internet on this subject but the information is confusing. I will be grateful to you if you can provide me with this information. RISHAB KUMAR

Via mail

A) Section 207 of the Income- Tax Act provides that advance tax is not be paid if an individual resident Indian:

( a) does not have any income chargeable under the head “profits and gains of business or profession”; and

( b) is of the age of 60 years ( senior citizen) or more at any time during the previous year. The above two points imply that if a senior citizen does not have any business income or any professional income during a financial year, he need not pay any advance tax. If any income is derived by a senior citizen through interest on term deposits, rental income on properties or pension income etc which are covered under various non- business heads of income, then such income does not attract the provisions of advance tax.

QI am given to understand that as per Section 80C, subsection 5, clause ( iii) of IT Act, if a house was purchased by taking loan, then it has to be held for 5 years and not 3 years. Otherwise since I was claiming IT deduction on the principal amount, this will be added to my income of previous year. Is it correct?

ABHINAV SHARMA Via mail

A) According to Section 80C ( 5) ( iii), if the assessee transfers the property, in respect of which deduction has been claimed, before the expiry of five years from the end of the financial year in which possession of such property has been obtained by him, no deduction will be allowed in the previous year in which the house is transferred. The aggregate of the deductions allowed in the preceding years will be deemed to be the income of the assessee for the previous year in which the house property is transferred.

QI have sold a property which I have been holding for more than four years. I have incurred some losses in my short- term holdings in shares. Can loss from short term capital assets and loss from business be set off against Long term capital gains? If I have no other income. Can I deduct the minimum nontaxable income i. e., ` 2.5 lakh from long- term capital gains? SHEKHAR Hyderabad

A) Loss from short term capital assets including short term loss on shares can be set off against long- term capital gain. The CBDT has clarified vide Circular No 721 dated 13/ 09/ 1995 that if there is loss from any other source or under any head of income which is eligible for set off, such loss can be set off against long term capital gains and the only the balance will be taxed after considering the basic exemption limit. Further, you can also avail the cost inflation index benefit on sale of long term capital assets.

( The write is a Hyderabad- based chartered accountant. Please send your queries to info@ rathiandmalani. com)