I had purchased a flat with a loan from my employer bank. The loan amount was disbursed in stages. The construction of the flat was completed in October 1989, and the last installment was disbursed in March 1991.I had paid my contribution towards the project cost before the bank disbursed the loan amount.

I'm repaying the loan by way of monthly installments, first towards the principal amount. The interest is to be repaid after the full repayment of principal amount as per the conditions of the loan.

Now I intend to sell the flat and repay the loan amount. But for that purpose, I would like to ascertain my income-tax liability. As the expenditure for acquiring the flat was incurred over a period of 15 months, how is the acquisition cost to be indexed? Further, is the annual interest accrued to the loan amount to be indexed, too? If yes, how is it to be done?

-- M V Kelkar, Satara

The financial year in which you were given possession of the house is material for the sake of computing the capital gains. The fact that you had taken a loan for acquiring the property is not of consequence. Interest paid on the loan of up to Rs 15,000 can be set off against your other income. In addition, installments paid towards repayment of the loan of up to Rs 10,000 can be claimed for the purpose of rebate u/s 88. It is unfortunate that the terms and conditions of your loan did not cover part reimbursement of loan (eligible up to Rs 10,000 u/s 88) and the rest towards interest (eligible to be set off against your total income, under all heads, up to Rs 15,000).

I purchased 100 shares of Tisco on November 20, 1992, and paid Rs 21,900. I again purchased 100 Tisco shares on November 26, 1996, and paid Rs 16,325. I sold 100 Tisco shares on February 24, 1997, for Rs 19,100. Is it mandatory for me to go strictly on a first-in, first-out basis? Do I have the right to claim that I have sold the shares from the second lot, if it is advantageous for me to do so?

-- B M Kurva, Mumbai

You have the right to pick and choose. The only care you have to take is to deliver the certificate from the right lot. Unfortunately, this facility is denied to those who have submitted their certificates to depositories. The depositories have been created to smoothen and streamline the systems and procedures and eliminate all the problems arising out of bad delivery or loss in transit. I had heaved a sigh of relief when I came to know that India was going to adopt this new technology, but felt sorry when I realised that this most important facility is denied to account-holders.

I'm a British national of Indian origin, living in England. I'm planning to invest in India. But the investment should be absolutely safe. Is a good agrotech enterprise the right place to invest? I know a little about agrotech and am sure the returns are excellent.

Such enterprises claim that the returns work out at nearly 100 per cent compounded annually. This appears to be better than any other avenue, including investment in the bluest of blue chips in the stock market.Have I got the correct information? Please advise me.

-- J Singh, UK

You have correctly said that if this claim is right, this is a better avenue than investment in the stock market or, for that matter, any other investment either in India or elsewhere. An advertisement is not a promise. The main question that requires an answer is whether the claim is right. I'm personally quite chary of investing my hard-earned money in any such high-rise avenues.

At present, the Indian market is flooded with many such companies, some good and some bad. The Securities and Exchange Board of India (SEBI) plans to bring such companies under its surveillance. When and if this happens, the answers to such questions can be given with a greater degree of certainty. Most of such companies claim that the income is free from Indian tax and I'm personally not sure whether this claim is tenable. I only wish CBDT would come out with a much-needed clarification, but it has chosen not to do so, so far. I'm afraid that this wish of mine will never be fulfilled, thanks to the financial clout of such companies and the weakness of the government in taking strong decisions. Until such schemes get credit ratings and SEBI (or any other authority) takes the responsibility of ensuring that such companies are not fly-by-night ventures, you will do well to wait and watch. This applies not only to NRIs, but also to residents.

I have procured a lucrative job abroad and am likely to leave India within a month. I understand that I shall be treated as an NRI from the FERA point of view and am expected to instruct all my banks to change the status of my accounts from resident to non-resident. Should I also do likewise in the case of my PPF account? Henceforth, PPF is useless to me. What shall I do with it?

-- Prashant Nanivadekar, Mumbai

There's no need to change the status of your PPF account. It is true that you can discontinue making any contribution to the account and, at its maturity, close the account. You will earn full interest on the balance. There will be no penalty. However, I would very much like you to contribute just Rs 100 every year to the PPF account, just to keep it alive. This gives you two privileges. In the seventh year after having opened the account, and every year thereafter, you can exercise your right to partial withdrawals as per the PPF rules. Again, if and when you come back to India, this account would once again become useful.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.