Tax queries: VRS benefit up to Rs 5 lakh is exempted from tax
Dilip Lakhani, Senior Chartered Accountant, answers queries from our readers on income tax and other levies.
I worked for a public sector company, and I opted for voluntary retirement with effect from April 1, 2018. I will receive Rs 6 lakh on voluntary retirement apart from gratuity, provident fund payout etc. Do I have to pay any tax on this amount? Ganesh Iyer, Mumbai
As per Section 10 (10C) of the IT Act, 1961, any amount received by an employee of a public sector company on voluntary retirement is exempt up to Rs 5 lakh. You have to receive this amount in terms of a scheme of voluntary separation. As you have received Rs 6 lakh, you will be liable to pay tax on Rs 1 lakh. As per second proviso to Section 10 (10C), once this exemption is allowed in an assessment year, no exemption will be allowed thereafter to you in relation to any other assessment year.
I am an executive in a private sector company. I have taken a housing loan of Rs 50 lakh from HDFC. I have booked a residential apartment in July 2015. I have paid interest from July 2015 to March 31, 2018. I will receive possession of the flat in July 2018. I will use the property as my residence. Will I will get full deduction for interest I have paid on loan taken from HDFC? Ravi Mehra, New Delhi
The interest paid on housing loan is allowed as deduction as per provisions of Section 24 of the IT Act. You will take the possession of the flat in AY 2019-2020. The interest paid in AY 2019-2020 will be allowed to the extent of Rs 2 lakh. Interest paid from July 2015 to March 2018 will be allowed to you as deduction in 5 equal instalments, starting from AY 2019-2020. You will get one fifth of the amount paid as interest in AY 2019-2020 and the balance in subsequent 4 years equally. For claiming deduction of interest one of the conditions is that construction should be complete within a period of 5 years from the year in which loan is taken. Since you satisfy this condition, you will get the deduction.
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