No, I am not with you. Pension is essentially a deferred salary. Hence, the standard deduction. It is available to all ex-employees, whether senior or junior. Similarly, the benefit of tax rebate is available to all senior citizens, ex-employees or otherwise. Galloping prices and companies sinking one after the other are common to both junior and senior citizens. The other tax saving provisions, such as deduction u/s 80L and rebate u/s 88, are also common. Again, all who invest in companies of unscrupulous character, which sink after collecting public funds, have only themselves to blame. This greed is a common feature.

I fail tounderstand why investors are not guided by credit ratings. True, this is not fool-proof protection as has been proved by the CRB imbroglio. But CRB was an accident and the probability of accidents is low. This is also a common feature. As for the sinking companies, the Securities and Exchange Board of India (SEBI) could have prevented some of the accidents, but that is another story altogether. Many analysts feel strongly that it is SEBI that is responsible for some of the accidents and I also hold that view. Many feel that instead of catching hold of the errant companies and making them pay, SEBI blames the existing laws and changes them in an unsatisfactory fashion. As a result, the primary market has developed rigor mortis and the secondary market has been languishing ever since SEBI took over the mantle from the Controller of Capital Issues.

Incidentally, the tax rebate for senior citizens is Rs 10,000, which means that taxable income of up to Rs 1,05,000 (and not Rs 1,00,000) does not attract incometax.

I had purchased a flat after availing of a loan from my employer bank in April 1993. The loan amount was disbursed in installments during the construction work as and when the builder requisitioned it. The last installment was disbursed in October 1995. I was still repaying the loan by the way of monthly installments, first towards the principal amount. The interest was to be repaid after full repayment of principal amount as per the conditions of the loan.

Now I have sold the flat on December 16, 1998. I have repaid the bank loan along with the interest. As the cost for acquiring the flat was incurred over a period of 30 months, how should I index the cost of acquisition?
--M V Kelkar, SATARA

The date when the builder gave you possession of the house is crucial for ascertaining whether you have earned long-term or short-term capital gains. The last installment was paid in October 1995. The period of 3 years is to be counted from the date of possession, and not the date of the lastinstallment. The fact that you had taken a loan for acquiring the property is not of consequence in ascertaining either the cost of acquisition or the short-term or long-term nature of the asset. You are in trouble if the possession was taken by you after December 16, 1995.

You are in bigger trouble on two additional counts.

Payments towards the cost of construction of a residential house property, the income from which is chargeable to tax under the head ``income from house property'' qualify for tax rebate u/s 88 with a ceiling of Rs 10,000, provided such payments are towards installments or part payments of loans from eligible sources.

As regards the interest, where the property has been purchased, constructed, repaired, renewed or reconstructed with borrowed capital, the interest payable is deductible. The ceiling on the deduction has been increased from Rs 15,000 to Rs 30,000 by FA98 and this is deductible from income under any other head, including salary. The Act has given the employee the rightto give his employer the details for adjusting TDS on salary! If the interest payable is for a period, prior to the year in which the property was acquired or constructed, it shall be deducted in five equal annual installments commencing from the year in which the house was purchased or constructed. The Section 88 benefit is not possible on such installments towards repayment of the loan prior to the completion of the house.

Both these reliefs are allowed only when the construction is complete, the flat is ready for occupation and the municipal annual value known. It is unfortunate that the terms and conditions of your loan require you to pay the capital amount first and then the interest. You are not eligible to the rebate u/s 88 until you took possession and since you were still reimbursing the capital, you were denied the benefit of deduction of interest. I do not understand why your bank is so unkind to its employees. The only redeeming part is that during FY 1998-99, you will be entitled to the fullrebate on Rs 10,000 and the full deduction of Rs 30,000 (for the first time) on the interest.