My son is studying B.E (Mech.) in payment seat. I have taken a higher education loan of Rs 40,000 for his higher studies. Am I eligible to claim for tax deduction under section 80E of the Income Tax Act if I repay the loan in this financial year? Please clarify.

A.K. Dubey, Baroda

You are not eligible to claim deduction in respect of repayment of the educational loan. A deduction can be claimed under section 80E only if the following conditions are satisfied: the assessee is an individual, the assessee has out of his income chargeable to tax repaid a loan or the interest thereon, taken from any financial institution or approved charitable institution, and the loan has been taken for the purpose of pursuing the assessee’s higher education. The deduction shall be the amount repaid by way of principal and interest but shall not exceed Rs. 40,000 per annum. The deduction is available for eight assessment years commencing from the assessment year relevant to the previous year in which the assessee starts repaying the loan or the interest. In your case, while your son is pursuing the education and you make repayment, therefore the deduction under section 80E cannot be claimed.

How does a pension plan score over a normal savings instrument like PPF? Since it doesn’t offer any guaranteed return and whatever returns it will offer, in all likelihood is going to be much less than that of PPF/NSC etc. Isn’t it better to go for a term insurance and put the difference in a savings instrument like those which atleast offer guaranteed returns?

Ashok Dua, Chennai

Different investment instruments cater to different needs. The benefits specific to investments made in pension plans include:
1. Tax benefits under section 80 CCC for all income groups.
2. No upper limit on investments.
Some pension plans also offer the added benefit of life cover. They also provide long term returns where you can benefit from the investment expertise of life insurance companies. The investment made in personal pension plan can be market linked and can therefore offer higher returns as against investments in the Public Provident Fund (PPF) where the interest rate is controlled. Further, the rate of return in PPF is not fixed and can be changed by the government anytime.

I live in Delhi because I work there. I get HRA and live in a rented accommodation. I have constructed a house in Hyderabad with borrowed capital and my family lives therein. Could you explain me the tax implications on the amount of HRA received by me and the Interest paid on the borrowed capital?

Rajesh Sharma, Delhi

You will be entitled to get exemption on HRA to the extent permissible. Further Your house at Hyderabad will not be taxable because this is only self-occupied house. Self-occupation does not mean one should occupy the house one self. Occupations by dependents shall be treated as self-occupation. The Income Tax Act provides that where the house is self occupied the gross annual value of such house shall be taken as nil and a deduction in respect of interest up to a maximum of Rs.30,000 or Rs.1,50,000 depending on when you acquired the house shall be allowed which would result in a loss from this house which you can set off against your salary income. You are also eligible for tax rebate under section 88 on a maximum of Rs.20,000 towards repayment of principal of the borrowings.

I will be attaining the age of 65 years on March 5, 2004. Will I be treated as a senior citizen for the previous year 2003-04 (assessment year 2004-05)? Please advise me whether I can claim the rebate under section 88B of the Income Tax Act which is available for senior citizen?

You will be treated as a senior citizen for the previous year 2003-04 (assessment year 2004-05). Section 88B clearly provides for the rebate to a senior citizen where the person is of age of 65 years or more at any time during the previous year and the amount of rebate admissible is the total of the income tax computed before claiming rebate under section 88 and relief under section 89(1) or Rs. 15,000 whichever is less.

If you have any investment or tax related questions, send in your queries to:
The Editor, Bajaj Capital Investors India,
Bajaj House, 97, Nehru Place, New Delhi - 110019