Tax Benefits Under HRA Only Available To Salaried Employees For Rented House

My wife and I work in a public sector undertaking. Can we both claim tax benefit in respect of house rent allowance (HRA)?

Answer: Tax benefits in respect of HRA is available only to salaried employees who are in receipt of HRA from their employers. The tax benefit is available in respect of rent paid by you for a house occupied by you. This benefit is not available in case you are owner of the house, whether in part or in full.

In case both you and your wife are in receipt of HRA from your respective employers, and both are paying rent for the property occupied by you, you can claim the exemption for HRA.

The exemption available will be least of the following:

•  Rent paid in excess of 10 per cent of the basis salary.

•  Actual HRA received.

•  50 per cent of the basic salary in case you are staying in a metro city. Else, it will be 40 per cent of the basis salary.

Do note that in case both of you are not paying the rent, then you won’t be entitled for the exemption. Do ensure to submit the rent receipt along with the rent agreement to your employer well in time to ensure that the same is taken into account, and tax is deducted accordingly.

Are profits from stock futures where securities transaction taxes (STT) are paid considered as short-term capital gains (STCG) or are they treated as business income? Can loss from these trades be carried forward to the next year?

Answer: Under the Income-tax Act, 1961, the transactions of dealing in futures and options are to be treated as business transaction, and therefore, any profits and losses made on such transaction have to be reported under the head “Profits and Gains of Business of Profession” and, therefore, cannot be treated as capital gains.

Moreover, the transaction of futures and options (F&O) are not treated as speculation transactions. So, the loss from transaction in stock futures have to be first set off against business income, and where there is no business profits, or where the profits are insufficient, the loss which cannot be set off can be set-off during the same year against income from any source except salary income.

The unabsorbed loss in respect of such transactions can be carried forward for set-off against business income for eight subsequent years.

Can I gift some fixed amount to my parents (both senior citizens) and save on tax?

Answer: Any gift exceeding Rs. 50,000 in value in a year is fully taxable in the hands of the receiver, subject to exceptions prescribed by the law. Gifts received from specified relatives are not treated as

income. Since son is also covered under the definition of specified relatives, your parents will not have to pay any tax on the gift made by you.

However, there is no provision under income tax laws for granting any tax benefits to the person making such gifts. So, you cannot take any tax benefit in respect of money gifted to your parents, as this will be treated as application of income.

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.)