I want to sell my residential plot in Gurgaon. The sale proceeds could be around Rs 90 lakh. Is it possible to avoid capital gains tax, if I buy agricultural land? Or is it essential to invest only in the purchase of a residential plot or a house?

J.P. Yadav, Via E-mail

To avail the exemption under Section 54F, the sale proceeds of a residential plot has to be invested in the purchase of a residential property or house. The residential house can be purchased within one year before the sale of the house property or within two years after the date of sale and if a residential house is constructed, a period of three years is provided for investment.

The investment of sale proceeds in a residential house is allowed subject to fulfillment of certain conditions. The deduction under Section 54F for investing in a residential house is permitted only if you do not own more than one residential house other than the new residential house on the date of sale of the plot of land. Further, you cannot claim any exemption by investing the sale proceeds in the purchase of agriculture land.

I own and occupy a flat in Chennai and for which I pay maintenance charge every month. Can I claim the maintenance amount too along with the home loan, as an increased cost of living under Section 10(14) (ii)?
Thomas, Via E-mail

Since the annual value of self-occupied house property is taken as nil, no maintenance charges are allowed. Even when a property is leased out, a mandatory deduction of 30 per cent of the annual value is allowable, and not the actual maintenance charges incurred by the owner of the property.

I had taken retirement from a nationalised bank under the volunteer retirement scheme (VRS). Since I had not opted for the pension scheme, I got Rs 3,55,245 being the Bank’s Contribution towards Provident Fund (BCPF). Later, I recently opted for a new pension scheme offered by the Indian Banks Association. But in order to be eligible for the scheme, I was asked to pay back the entire BCPF (Rs 3,55,245) and an additional amount (56 per cent of BCPF) of Rs 1,98,937, totaling to Rs 5,54,182.

In order to reduce the amount to be paid for the scheme, I had opted for the commutation of one-third pension. This reduced the amount to be paid by `3,08,858 and I paid the remaining balance of Rs 2,45,324. Following this, the bank sanctioned pension to me with effect from November 27, 2009.

Please clarify, if I have to file income-tax returns for the financial year 2010-11. I have not filed the return for the FY09-10 as I had negligible income.

Does the 56 per cent of BCPF (Rs 1,98,937) that I paid eligible for the deduction for FY 10-11? Is the commuted pension taxable? Am I eligible for a standard deduction?
Mohamed Rafique Aziz, Via E-mail

The pension received will be taxable in your hands and no standard deduction is allowable. Employee’s contribution only is eligible for deduction under Section 80C. As regards the commuted pension, a non-government employee can avail exemption to the extent of one-third of the amount of the commuted pension, which he would have received, if he had commuted the whole of the pension in case he is also in receipt of gratuity.

(Kamal Rathi is a chartered accountant, representing Rathi & Malani, a Hyderabad-based accounting firm. Readers can mail their queries on income tax to kamalrathi.ca@gmail.com)