Rehabilitation Grant exempted

SC Vasudeva

Q. Being a victim of 1984 riots, I have recently received a sum of Rs 5 lakh as Rehabilitation Grant from the Central Government. Please let me know whether this amount is taxable or not. — Gian Kumar

A. The amount received as Rehabilitation Grant from the Central Government by you should be exempt from tax under Section 10(10BC) of the Income-tax Act 1961 (The Act) which provides for the exemption of any amount received from the Central Government or the State Government or local authority by an individual or his legal heir by way of compensation on account of any disaster. The term ‘disaster’ as defined by the Disaster Management Act, 2005, covers a grave occurrence in any area arising from natural or man-made causes. In my opinion, the amount of grant received by you should be exempt from tax under the aforesaid section.

Q. I intend to put my individual moveable asset like FDs etc. to the common stock of existing HUF of which I am also the Karta.

(a) What procedure has to be adopted where both individual and HUF are taxpayers or any one of them is an assessee?

(b) Where both individual and HUF are not assessed to tax income being below taxable limit.

(c) Is there any tax liability on such transaction? — Ravinder Kumar

A. (i) You will have to make a declaration for throwing your individual property into the common stock of the family. Such declaration will be required for both the situations cited by you in your query. Such declaration can be in the form of an affidavit which will have to be sworn in by the person who intends throwing his property into the common stock of the family.

(ii) Section 64(2) of the Act provides that in case an individual who is a member of Hindu Undivided Family and impresses his separate property with the character of property belonging to the family or throws into the common stock of the family, it shall deemed to be a transfer to the members of the family for being held by them jointly and the income arising from the converted property or any part thereof shall be deemed to arise to the individual who has thrown his individual property into a common stock and shall be assessed accordingly. Similar provisions exist in the Wealth-tax Act, 1957, whereby such property will continue to be treated as property of the individual for the purposes of levy of the wealth tax.

Q. I am a senior citizen aged 70 years and a pensioner. Recently, I have taken a personal loan of Rs 2 lakh from a bank. Since my total income is taxable, can I avail deduction on principal or interest on the loan? If so, under which section? — GL Gupta

A. Section 80C of the Act provides for a deduction of an amount paid towards the repayment of amount borrowed for the purposes of construction or acquisition of a residential house. The above deduction is permissible from the total income within the limit of Rs 1.50 lakh. In view of the fact that the amount has not been borrowed by you for the purpose as aforesaid, no deduction in this respect is permissible from your total income under any provisions of the Act.