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Ask Mint | Taxation

Ask Mint | Taxation
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First Published: Wed, Jan 05 2011. 08 53 PM IST
Updated: Wed, Jan 05 2011. 08 53 PM IST
I work with a multi-national company on contractual basis wherein my employer pays me professional charges instead of paying me salary as a regular employee. The company deducts tax at source at 10% every month. I checked with the finance department and they said that I will be provided with Form 16A. I wanted to know under which category should I file returns for assessment year 2011-12 and under which section? How can I claim back my tax that my employer has deducted every month? What kind of rebates can I get to minimize my taxable income? Can I also get the benefits of investments under section 80C?
—Vinay
You will have to file your returns under the category of a self-employed person who is being paid retainership/professional charges. The amount of tax deducted at source can be reduced from the gross tax payable on your total income. Form 16A supplied to you by the tax deductor would enable you to claim such adjustment against the amount of gross tax payable by you.
You can claim the benefit of specified investments made under section 80C of the Income-tax Act, provided such investments have been made before the close of the fiscal year ending 31 March 2011.
My wife took an education loan from a bank in the fiscal year 2009 for her sister’s education. She is paying monthly instalments, including the interest part, to the bank. Is she entitled to claim deduction of such monthly instalments in respect of the said loan?
—Soham
Under the Income-tax Act, there is a provision for deduction of only the interest amount of an education loan and not the principal component. As per section 80E, an assessee can claim a deduction in respect of the interest paid on loan taken for the purpose of pursuing higher education and of his/her spouse and children for eight assessment years, the first year being the assessment year in which he/she starts paying such interest. Such loan has to be from a financial institution or approved charitable organization. Since in your case the money is borrowed for the education of your wife’s sister, she would not be entitled to claim deduction in respect of the interest paid on such loan.
I want to invest in an infrastructure bond for a tenor of three years. Will I be taxed after three years when I withdraw from the scheme?
—Raj
When you redeem infrastructure bonds, you will receive the principal amount together with the interest thereon. The principal amount is not taxable after three years but the interest that you receive on these bonds will be taxable in your hands.
Sachin Vasudeva | Senior partner, SC Vasudeva & Co. Chartered Accountants
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First Published: Wed, Jan 05 2011. 08 53 PM IST