Ask Harsh Roongta anything on Personal Finance: When not sure of final income, let TDS be deducted and claim refund later

I have availed of my complete 80C benefit by way of life insurance, PPF, etc. I wish to also open a PPF account for my granddaughter who is 16 years old. I will be depositing Rs 1.5 lakh in her account but will not be claiming income tax benefit for the same. Since the interest is tax-free on PPF, the interest will not be clubbed to her father's income. After the completion of 15 years, the entire amount will go to my granddaughter. Just wanted your advise if I can do this. I have been submitting 15G form thinking that my income was below Rs 5 lakh. However, I realised during the end of March that there was some miscalculation and the amount is more than Rs 5 lakh. I will pay the self assessment tax. However, regarding any penalty or issue, please advise.
—Latha

Only the natural parents of the minor child (mother or father) can open the PPF account on her behalf. As a grand parent you can gift money to the minor child by depositing it in her PPF account. The total contribution to minor child's PPF account (including money gifted by you and any other deposits made in that account) plus the contribution to the specific natural guardian's PPF account cannot exceed Rs 1.50 lakh in a year. Please ensure that is taken care of. In essence, get one of the parents to open a PPF account for your minor granddaughter and make sure that the total contribution in your grand daughter's account plus the contribution in that particular parent's account does not exceed Rs 1.50 lakh a year. Your purpose can be served subject to these limitations. As far as your incorrect declaration is concerned, it can lead to implications in terms of penalty, etc., if it can be proved that the wrong declaration was deliberate. In your case that is clearly not so. But it is in your own interest to make sure that you pay the full self-assessment tax including interest, if any, payable for non-payment and deferment of advance tax. In the future it will also be better for you not to make the declaration and let TDS be deducted if you are not sure of your final income. You can claim a tax refund if it is due rather than run the risk of making an incorrect declaration.

I have taken a house on loan in Dombivali, Thane, for which I am claiming principle and interest tax benefit since 2 years. Now, because of shifting my job, I have relocated to Dahisar and taken a rented house as it is nearer to my office, which is in Malad. The house for which I am paying loan is locked. Is it possible to claim both tax benefit of HRA and housing loan (interest 24(b) + principle 80C)? Is there any criteria that to claim both these tax benefits relocation should be in another city or is there any distance limit?
—Santosh Gupta

First, a quick understanding on how the deduction for home loan interest works. The rental receivable in respect of any property owned by you is taxable in your hands net of municipal taxes. From this value, a 30% standard deduction is allowed as well as the amount of interest payable on the loan taken to acquire that property is allowed as a deduction and the balance amount is chargeable to tax (if it is a positive figure) or is adjusted against other heads of income (if it is a negative figure due to interest deduction). If the property is self-occupied, the rental income is treated as NIL and hence the home loan interest becomes the only deduction and the resultant loss is allowed to be set off against your salary income. Now to answer your query, there is no linkage at all between claiming exemption for HRA in respect of rent paid for a rented house and claiming a deduction for home loan interest. It does not matter if the owned property and the property rented out are in the same building. You will still be eligible to claim both – the exemption for HRA as well as the deduction of home loan interest. The only thing that can change is whether your owned house (Dombivali) in your case will be treated as a self-occupied house or as a non-self occupied house. Here if you are not able to use the Dombivali house because "owing to your employment carried on at another place you are required to reside at that other place (Borvali), then the rental value of the Dombivali house will be treated as NIL. However, if the owned house was situated in the same building and was still locked and not used, then the deemed rental would need to have been taken for that house as if it had been rented out. In your case, you can easily claim it as NIL because of the facts outlined by you. In any case I still wanted to emphasise that the only thing that would have changed in that circumstances is that 70% of the rental value would have been taxable in that case, but the interest would have remained deductible.

Harsh Roongta is a chartered accountant and Sebi-registered investment expert. Send your queries – be it on mutual funds, tax, loans or savings – to personalfinance@dnaindia.net or tweet them to @AskHarshdna'