Loan from friend won’t qualify for IT deduction
I am a government employee and have borrowed Rs 2 lakh for higher education of my son, who is studying in the UK. I am paying Rs 2,500 per month as interest. Can I claim the IT exemption for the interest paid to my friend under section 24 of IT rules. Please clarify.
Joguu Rajesham, Via email
The deduction for interest on the loan taken for higher education is allowed to the assessee himself or to his or her spouse and children of the individual. This deduction is allowed under Section 80E and not under Section 24. However, only the amount paid towards interest on the loan availed from any financial institution or any approved charitable institution for the purpose of pursing higher education is deductible. So, you cannot claim any deduction towards interest paid to your friend.
I need a clarification regarding my taxable amount and eligibility for different saving schemes. I am working for a private company in Ahmedabad. My gross salary per month is Rs 50,000 and my salary components per month is as follows:
Basic salary is Rs 26,316; HRA Rs 10,526; Special allowance Rs 1,108; Medi-cal Rs 1,250; Conveyance allowance Rs 800; LTA Rs 10,000; and PF Rs 3,157.
I would like to know the taxable amount after the deductions? I have not invested anything so far. I am living in a rented house. Please let me know the taxable amount?
Nilesh Kumar, Via email
Your tax liability for the financial year 2010-11 works out to Rs 29,126, if you do not make any further investment. You are eligible to invest a total of Rs 1 lakh under Section 80C in schemes such as PPF, NSC, LIC and an additional investment of Rs 20,000 in infrastructure bonds. If the entire deduction is of Rs 1.2 lakh is availed, your tax liability shall be Rs 20,669.
It is assumed that medical reimbursement of Rs 15,000 is incurred and claimed. Further, in the absence of details of rent paid on your house, HRA figure is assumed to be the actual rent paid. LTA has not been claimed in the above computation, since LTA can be claimed on the actual expenditure incurred subject however to the conditions laid down under Rule 2B.
(Kamal Rathi is a chartered accountant, representing Rathi & Malani, a Hyderabad based accounting firm. Readers can mail their queries on income tax to kamalrathi.ca@gmail.com)
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