Pradeep Gaur/Mint
Pradeep Gaur/Mint

Interest on loan taken from family may not be tax exempt

It is advisable to have documents for this loan.

I had a balance amount of 1.68 lakh on my home loan, which I pre-closed using 2 lakh that I had borrowed from my father. I used the remaining money to make a downpayment for a car that I bought on loan from a public sector bank. Do I have to report the borrowed 2 lakh as income from other sources? This transaction happened in July 2013, and after that I have filed return for assessment year 2013-14.

—Kiran

Assuming that you are not engaged in any business or profession, there is no need to disclose the details of the loan taken from your father in your personal tax return filed for FY2012-13. But if you are paying or propose to pay any interest on this loan, then the interest may not be allowed to be deducted as the loan has been utilized for personal purposes. Also, it is advisable to have documents for this loan.

I have made most of my section 80C investments in provident fund (PF). Can I put the rest in Public Provident Fund (PPF)?

—Bijoy Kumar

Yes, you can invest in PPF as it, too, qualifies for tax benefit under section 80C. Since, the maximum deduction available is 1 lakh in a financial year (FY), the tax deduction for the PPF investment will be to the extent your PF contribution falls short.

How to save taxes apart from deductions under section 80C?

—Vinathi

This is a very fact specific question. There are various options such as investment in Rajiv Gandhi Equity Savings Scheme, donations to charitable organizations and medical premiums. Similarly, you could claim capital gains tax exemption for any long-term capital gains by investing in residential apartment or specified bonds if you satisfy the conditions of these provisions.

I am paying my retired father’s life insurance premiums. Will these be tax exempted for me? Does he have to file a return ?

—Jivesh

You cannot avail the tax benefit under section 80C for payments you make for your father’s life insurance premium. Further, it is mandatory for an individual whose total income exceeds the basic income exemption limit for the relevant fiscal to file his personal tax return. The date is 30 September if the accounts are required to be audited under any law, or 31 July in any other case.

The specified income threshold for FY2013-14 is 2 lakh for an individual below 60 years, and 2.5 lakh for an individual above 60 years but below 80 years. For anyone above 80 years, the exemption threshold is 5 lakh. If your father’s total taxable income exceeds the specified threshold, he would be required to file his personal tax return.

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