Financial Health Check

If I buy 8 per cent Government of India taxable savings bonds, then is the interest received on these bonds eligible for a deduction under s...

If I buy 8 per cent Government of India taxable savings bonds, then is the interest received on these bonds eligible for a deduction under section 80L of the Income Tax Act? If yes, then what is the maximum deduction allowed?
Deepak Mehta

On 8 per cent (taxable) bonds of RBI, a deduction under section 80L is available within the amount of Rs 12,000 and additional exclusive of Rs 3,000. RBI has, vide notification no. F 4 (10)–W&M / 2003 dated 13 January 2004, also clarified that these bonds are Government Securities and hence there will be no tax deduction at source irrespective of the quantum of interest amount. However, the recently launched 9 per cent Taxable Senior Citizens Savings Scheme will not the get additional Rs 3,000 under section 80L since the same is a savings scheme.

I propose to sell my old house for a price of Rs 8 lakh. I had bought this house at a very low price in 1982 at Rs 48,000. I now intend to buy a new house investing the proceeds of this sale wholly after a year or so. I want to know if I am required to pay the capital gains tax immediately after receiving the sale proceeds? Where shall I park my funds in order to save capital gain tax and how long?
Prakash Naik

The long term capital gains tax on one residential house when invested in another residential house within the time limits stipulated in section 54, would be fully exempt. However, pending purchase or construction of the house, you may deposit the funds in a Special Deposit Account with designated Banks (SBI, BOI, Bank of Baroda to name a few) and withdraw the deposit funds for making payments to the builder/contractor. The time limit for outright purchase is within one year before or two years after the sale of the first house or within three years after, you must construct the residential property.

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