Interest received on SB account is taxable

My son has been staying in the US since August 2009. He has paid taxes there for the year ended December 31 2010 but he receives interest and dividend income in India. His bankers have deducted taxes on the interest and dividend income, though he hasn’t received TDS certificates yet. Kindly advise if based on the bank’s statements, he could file a return in ITR 2 and claim refund since his income from securities would be below the allowable limits. He is also paying interest on the home loans on which he is eligible for rebate. Kindly clarify, so as to enable him to file his IT returns for the year 2011-12.
V. Kumaraswamy.
via e-mail

Dividend income will not attract any tax liability if it is covered by the provisions of Section 115-O, wherein the dividend distribution tax is already paid by the domestic (Indian ) company. However, if tax deducted at source (TDS) is on income received from the mutual funds units or UTI units purchased in foreign currency, it is liable to be taxed at 20 per cent. Interest income received from banks will be eligible for the basic threshold limit laid down under the Indian tax laws. Hence, refund can be claimed on the TDS on interest income whereas the

TDS on dividend (other than those covered under Section 115-O) will attract tax liability of 20 per cent. Interest paid on housing loan can be claimed as deduction under section 24 subject to the ceiling specified under that Section. Therefore, to claim refund the income returns in form ITR 2 needs to be filed. However, for filing the returns, the particulars of TDS from various sources needs to be provided.

Is the interest received on the SB accounts taxable? If the said deposits are withdrawn before the specified time limit, is it taxable?
Vijay
via e-mail

Interest on saving bank (SB) account is a taxable income. If the withdrawals under various schemes, like tax-saver deposits or SBI magnum tax gain scheme, are carried on before the time specified under the said schemes, it shall be liable to tax. Otherwise, there is no liability to tax on such withdrawals.

I had sold a plot of land. which was purchased in March 1999. I have indexed cost of March 1999 to the current index of 711. I have deducted this indexed cost from the sale consideration. Is this the capital gain which I have to invest u/s 54EC in NHAI Bonds. Do I have to invest the capital gains?
A. Rao
via e-mail

Since the plot of land sold is held by you for more than 36 months, any gain arising on sale, shall be treated as long-term capital gain (LTCG). Cost inflation indexation benefit on sale of long term capital asset is available. Hence, you are right in deducting the indexed cost from the sale consideration while computing the LTCG. Section 54EC provides for investment of LTCG in National Highways Authority of India or Rural Electrification Corporation Limited bonds and not the sale consideration.

(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])