I have a Public Provident Fund (PPF) account running for the last six years with a balance of around Rs. 5 lakh. Till date I have not disclosed it in my income tax return (ITR). Should I show it in my ITR from next year? How and where I can show it?
You need to disclose the interest received on Public Provident Fund under exempt income in your income tax return. In respect of the aggregate of interest paid before possession of the property, you can claim the same in five parts beginning from the year of possession. Any amount received on life insurance policy is exempt under income tax
I have a Public Provident Fund (PPF) account running for the last six years with a balance of around Rs. 5 lakh. Till date I have not disclosed it in my income tax return (ITR). Should I show it in my ITR from next year? How and where I can show it?
Answer: You did not have to disclose the details of your PPF balances in the ITR unless your income exceeded Rs. 50 lakh in a year. However, you are required to disclose the interest received on your PPF account under the EI (Exempt Income) schedule as the interest on PPF account is fully exempt.
Since the interest on PPF account is anyway exempt, the omission does not have any serious consequences for you. I would advise you to show the accumulated interest in EI schedule now while filing your ITR for the next year.
For the current year, the interest for my housing loan is Rs. 3 lakh. In addition to this, I had paid pre-equated monthly instalment (EMI) of Rs. 2 lakh for the construction period. I took possession of the flat on April 15, 2023 and let it out for which I will receive a rent of Rs. 1.20 lakh for the current year. How much interest I will be entitled to claim and how will my income from this property be calculated?
Answer: In respect of the aggregate of interest paid prior to the year in which you take possession of the property, you are allowed to claim the same in five equal parts beginning from the year in which you take the possession.
So, from the pre-EMI interest of Rs. 2 lakh, you will be able to claim Rs. 40,000 this year. Since the property is let out, you are entitled to claim full interest i.e. 3.40 lakh in the current year. (Rs. 3 lakh for current year and Rs. 40,000 pre-EMI interest), but will only be able to claim loss under the house property head up to Rs. 2 lakh against other income.
From the rent of Rs. 1.20 lakh, you are allowed a flat deduction of 30 per cent of the rent received. After deduction of Rs. 36,000 for repairs etc. as above and Rs. 3.40 lakh in respect of interest, your income from house property will be a loss of Rs. 2.56 lakh, out of which you will be able to set off Rs. 2 lakh against other income and the balance of Rs. 56,000 of unabsorbed loss will be carried forward for set-off against taxable income under the head “Income from house property” in next eight years.
I have earned Rs. 1 lakh as bonus on my life insurance policy, which I had purchased in 2000. Will it be included in my income?
Answer: Under Section 10(10D) of the Income-tax Act, 1961, any amount received in respect of life insurance policy, including any bonus, is fully exempt in the hands of the recipient.
However in case the policy was taken between April 1, 2003 and March 31, 2013 and if the premium of the policy exceeded 20 per cent of the sum assured in any year, this exemption will not be available. The limit of 20 per cent has been reduced to 10 per cent with effect from April 1 2013.
Since you had taken the life insurance policy prior to April 1, 2003 even the restriction of premium will not be applicable in your case and the amount of bonus of Rs. 1 lakh received by you will be fully exempt from tax in your hand.
Please note that the bonus is paid by the insurance company, but is credited to your policy at the time of its maturity and which will be fully tax-free at that time.
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.)