Pension is charged for income-tax as salary

I am a retired university officer drawing a monthly pension of Rs 23,000. Now I am working as a consultant in a private university. The university will give me Rs 20,000 as consultancy fees and Rs 5,000 as conveyance charges.

Some of my friends say that conveyance charges are fully exempted from income-tax and consultancy fees are charged under a different head of account other than the head of salary account. Please suggest how to calculate income-tax on my total income?

S.A. Chary , Via email

Consultancy fees will be taxed under the head “profits and gains from business or profession”. You will be eligible to claim any expenditure incurred for the purpose of carrying your business or profession.
However, the excess of conveyance amount to the extent not incurred also needs to be included in your total income since the amount is already claimed as expenditure by the concerned university.

The pension amount received will be taxed under the head “salaries”. You need to calculate your income tax liability after claiming the deductions under Chapter VI A — under Section 80C, 80D, 80G etc. The total income arrived after claiming the above deductions will be taxed depending on the threshold limit applicable to you for the fiscal 2009-10.

The threshold limit is Rs 1,60,000 for a male individual and `2,40,000 for a senior citizen.

I want to know tax deduction at source on arrears of rent payable for the period before October 1, 2009. The present TDS rate for the company is 10 per cent for rental income from October 1, 2010. If we are paying arrears rent which belongs to before October 1, 2009, how much TDS need to be deducted? Can I deduct the present rate of 10 per cent or previous rate 22.66 per cent, including surcharge and cess?
Madhu, Via e-mail

The point of tax deduction on rent arises at the time of credit or payment, whichever is earlier. Therefore, the time of credit in the books of accounts will determine the rate at which tax needs to be deducted on the arrears rent payable after the amendment to Section 194(I).

I purchased a flat worth Rs 1,85,000 on February 15, 2002, at a city in Gujarat. I sold the same for Rs 4,75,000 on April 1, 2010. What would be my long term capital gains (LTCG) and how much amount should I invest in bonds to avoid tax?
Manish Bhatt, Via e-mail

Your long term capital gain will be worked out after applying the cost inflation index as follows:
The cost inflation index for the financial year 2001-02 is 426 and for financial year 2010-11 is 711.Your capital gain works out to be Rs 1,66,232 — Rs 4,75,000 minus Rs 185000 X 711/426.
You need to invest only the amount of capital gains in the capital gain bonds of REC/ NHAI to avoid any tax liability.

(Kamal Rathi is a chartered accountant, representing Rathi & Malani, a Hyderabadbased
accounting firm. Readers can mail their queries on income tax to kamalrathi.ca@gmail.com [1].)