No tax on foreign allowance paid during deputation period abroad

SC Vasudeva

Q.  My wife is a teacher with Delhi administration and now on deputation in a university in China. The Government of India deputed her and Consulate in China is paying her salary. For five months in AY 2018-2019, she got only basic pay of Rs 88,500 per month of  her pay scale after conversion in US dollars. She received foreign allowance in US dollars in AY 2018-2019 which is non-taxable under Section 10(7). Please clarify whether basic pay of  Rs 4,42,000 received in US dollars is taxable? If so, under what section? — Bhupal Walia

A. You have mentioned in your query that the foreign allowance received by your wife is exempt under Section 10(7) of the Income tax Act (i.e., any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India). With regard to the salary of Rs 4,42,000 received by your wife, please note that the same will be taxable in India as it is deemed to accrue in India as per Section 9(1)(iii) of the Act (i.e., income chargeable under the head “Salaries” payable by the Government to a citizen of India for service outside India).

Q. I had a fixed deposit with SBI Model Town Branch, Patiala, which got matured on 07.10.2017. TDS for the year 2017-18 amounting to Rs 10,681 + Rs 22 (TDS on previous interest) was deducted by the bank on 07.10.2017. This amount is not being reflected in Form 16A of 3rd quarter as well as in Form 26AS of the Income-tax Department. The matter was taken up with SBI authorities and I was told that it will be corrected along with 4th quarter but it is again not appearing in the finally generated form 26AS of the Income-tax Department.  Now I have taken up the matter with DGM (Taxation) SBI, Mumbai for revision of form 16A. Please guide me how to show this TDS amount in my ITR for the year 2017-18.  Will the penalty clause of Rs 200 for each day of default for delay in filing TDS statement with the I-T Department also applicable on bank authorities?

— Pawan Kumar Garg

A. The amount of tax deducted at source, if not reflected in Form 16A issued by the bank, will have to be refunded to you by the bank as it seems from your letter that the amount of tax though deducted has not been deposited by the bank with the department.

The penalty clause for not filing the TDS statement with the department is applicable to all the assessees. It may, however, be noted here that if SBI has filed the TDS return for the respective quarters on time but with certain errors, then penalty will not be levied. SBI can merely file revised TDS returns for rectifying the mistakes without attracting any penalty.

Q. I am a senior citizen of 86 years and an income tax payee. I was allotted a plot by HUDA in 2004 and I have paid the instalments as under with dates:

Amount Date   Instalments

Rs 94,991 01.05.2004 Initial payment of 10%

Rs 1,42,485 14.02.2006 Balance 15%

Rs 1,18,738 18.01.2008 1st instalment

Rs 1,18,738 14.01.2009 2nd instalment

Rs 1,18,738 11.01.2010 3rd instalment

Rs 1,18,710 19.01.2011 4th instalment

Rs 1,32,000 14.02.2012 5th instalment

Rs 57,043 02.04.2010 Due to increase in area

Rs 1,33,910 03.04.2008 Enhanced compensation

Rs 1,175 02.01.2009 Enhanced compensation

Rs 57,202 02.03.2012 Enhanced compensation

Rs 12,31,468 Total amount paid       

In addition, I have paid Rs 51,850 as extension fee from 02/2012 to 01/2018.

I have got a buyer who is ready to pay me Rs 1.5 crore for this plot all in white.

My queries are:

(a) How much amount is the long-term and short-term gain in my case?

(b) Can I demolish my old house and construct a new one from the gain amount?

(c) I have been told by my CA that if I deposit the balance amount (after construction) or whole of Rs 1.5 crore in the bank for three years with an interest of 6.5%, I will not have to pay any income-tax. Is there any limit of amount that can be deposited in the bank out of short-term or long-term gain? — JK Jain

A. (a)  The amount of long-term capital gain works out at Rs 1,27,86,539 after taking into amount of indexed cost of instalments and extension fee. While computing the above cost, it has been presumed that extension fee of Rs 51,850 was paid in January 2018 i.e. in financial year 2017-18.

(b) You should be able to claim exemption in case amount of capital gain is utilised for constructing a new house after demolishing the old house within three years after the sale of the plot.

(c) The suggestions given by your CA is not correct as the amount of capital gain is required to be utilised for purchase or construction of a new house within the specified period or the same can be invested in tax-saving bonds to the extent of Rs 50 lakh so as to claim exemption of capital gain from taxability. Such bonds have a lock-in period of five years and the interest earned thereon is taxable. The bonds have to be purchased within six months of the date of sale of the plot. The amount of capital gain remaining after utilising the amount for purchase or construction of a house and/ or for buying bonds worth Rs 50 lakh will be taxable @20% plus applicable surcharge and health & education cess.