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Q&A
Gratuity arrears
I have got gratuity of Rs 4,66,015 on my retirement from service on December 12, 2010, and income tax has been deducted on the amount. Because of wage revision in our organisation, gratuity arrears of Rs 2,77,130 has been paid to me. Will this amount be treated as taxable income in financial year 2010-11?
S. Majumdar, Andul
 
You can claim relief on the gratuity arrears under Section 89 of the Income Tax Act. The method of computation is provided in Rule 21A of the Income Tax Rules, 1962. It involves finding out two rates of tax. The first is the rate of tax applicable on the extra amount (arrears or advance) in the year of receipt. The second is finding out the rate of tax on the extra amount for the years to which they relate. The difference between the two is the extent of relief. However, the relief can be claimed where the payment of gratuity is for a past service of more than five years.
 
 
Prepayment rule
Are prepayment charges on a housing loan eligible for deduction under the Income Tax Act?
Chandrima Chatterjee, Howrah
 
Section 24 (b) of the Income Tax Act allows a deduction of interest payment up to Rs 1.5 lakh from taxable income for self-occupied properties and actual amount of interest paid for let-out properties. Under Section 80C, principal payment up to Rs 1 lakh, inclusive of other investments, can be deducted from the income while calculating the tax liability.
 
 
Twin accommodation
If a person claims deduction for repayment of housing loan, can he still claim house rent allowance from his employer for rent payment of another accommodation?
Abha Jain, Calcutta
 
He can claim both subject to certain conditions. The minimum distance between his workplace and the self-occupied property he had bought should be 50km. But he cannot claim house rent allowance from his employer for payment of rent for an accommodation if the house property which he owns and the house in which he is on rent are in the same locality.
 
 
If you have any queries about investing or taxes or a high-cost purchase you are planning, mail to: btgraph@abpmail.com, or write to: Business Telegraph, 6 Prafulla Sarkar Street, Calcutta 700 001.
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