Personal finance

Ask us: about personal finance and investing

Readers can send questions about personal finance and investing to [email protected] Our experts who write about personal finance will answer these questions. Moneywise will not give specific recommendations for investing in any particular mutual fund, stock, or fixed deposit.

Q. I am a state government employee earning 60,000 per month and have not opted for any tax saving scheme (except those made mandatory by the government like the NPS; nor am I interested by other tax saving regimes). My wife is also an employee of a state government PSU and earns 80,000 per month.

It has not opted for tax saving schemes either. We are interested in buying an independent house (less than 80 lakhs). But the problem concerns taking a home loan; my wife will not get HRA which will be 20,000 per month because we live in a rented house.

Is it better to take out a home loan only on my salary; and, saving money on my wife’s income, repay a certain amount each year, or is it better to take out a mortgage together? My wife can save taxes by taking out a home loan, but she will lose more if she doesn’t get the HRA. Also, we don’t really care about insurance or mutual fund plans. Please advise.

A. By applying for a home loan as a co-owner / applicant, you can each claim a deduction of up to 3.5 lakh from your total income. Up to ₹ 1.5 lakh in principal repayment and up to ₹ 2 lakh in interest repayment. The HRA exemption cannot be claimed by your wife.

Q. I have a retirement savings deposit with the post office. The annual interest on the deposit is less than 50,000. It is therefore not necessary to submit the 15H form. But the post office staff insist on submitting the form; otherwise, the system will deduct the tax, they say. Please advise on the matter.

A. TDS is not required to be deducted by banks, co-operatives and post offices if the interest payable to these seniors is less than 50,000 in a tax year. Regardless of whether or not the 15H form is submitted, the TDS deduction does not apply. You can lodge a complaint with the competent authority of the post office about this.

Q. I worked in Saudi Arabia for 8 years and returned in November 2021 after resigning from the company. I was in Saudi Arabia continuously for 227 days during the 2020-2021 fiscal year. I have NRE and NRO accounts with a bank for transactions. I hope that if the situation becomes favorable, I will find another job in the Gulf. I have NRE term deposits.

My question is: how long will the NRE status be available to me in 2021-2022? How long can I keep the NRE account and deposits as NRE deposits?

I wrote to my tax advisers who advised me to approach the bank. The bank did not give an appropriate response.

[Should I have withdrawn] all amount on deposit fixed NRE before the end of March? Will it be taxed if I withdraw in 2021-2022? If NRE status continues in 2021-2022, I think there shouldn’t be a problem. I ask you to suggest what can be done.

Narve Nagendrabhat Jagadeesha

A. For the 2020-21 fiscal year, you will be treated as a non-resident. Interest on NRE / FD accounts will be tax-free in India as long as you are a non-resident (NR) or resident but non-ordinary resident (RNOR). For fiscal year 2020-21, interest on the NRE / FD account will be tax-free in India. In addition, interest on NRE / FD account will not be taxable in India if you are a resident in successive fiscal years up to 3 fiscal years.

Q. I am a 53 year old CISF employee. Is the contribution to GPF (general provident fund) of up to 5 lakh per year by employees of paramilitary forces such as CISF and CRPF exempt from tax deduction? Please also suggest better alternative, inflation-resistant and tax-efficient investment or savings options.

A. Contributions to the General Provident Fund are permitted as a deduction under section 80C of the Income Tax Act 1961. The limit of the deduction is subject to the limits prescribed in section 80CCE of 1.5 lakh per year. GPF deductions can be claimed by all government employees for whom GPF is deducted by the employing government agency / authority.

A resident individual has the following popular options for investing in order to save tax under section 80C up to 150,000 per year and an additional 50,000 under section 80CCD (1B) –

1. Life insurance for self and dependents

2. Equity Linked Savings Plan (ELSS)

3. Tax-saving fixed deposits

4. National pension scheme (80CCD (1B))

5. Unit-linked insurance plans (ULIP)

6. Sukanya Samriddhi Yojana

7. National Savings Certificate

It should be noted that each of the aforementioned investment options has various endorsements and restrictions in terms of applicability, minimum investment, blocking period, treatment of maturity, treatment of accumulations, among others, and must be carefully considered while considering investing in all of them.

(N. Sree Kanth is partner, GSS Associates, Chartered Accountants, Chennai)


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