I shall start receiving this pension from November this year on attaining the age of 50 years. I have (on application) been exempted from deduction of tax on the annual pension of 1,902.45 pounds in the UK by the tax authorities there.

Am I liable to pay tax in India on the commuted amount of 5247.32 pounds and the annual pension of 1902.45 pounds? If so liable, is there any exemption/deduction that I can claim on either the full or part amount under any section (e.g. sec. 80RRA etc.)?

My personal thinking is that as the amount is being paid to me at a later date on account of services rendered outside India, mostly as non-resident and in foreign exchange which is wholly being brought into India, I should be eligible for some kind of benefit and should not be required to pay tax in India on the entire amount.

If in future, I take on a job outside India and become an NRI or an RNOR, what would be the position?

--Sharookh P Dalal, MUMBAI

The taxability of your commuted value of part surrender of your pension and also the annual pension you will be receiving will be guided by the `double tax avoidance agreement' between the UK and India. If and when you become an NRI or RNOR once again, this pension would not be taxed in India.

During the financial year 1983-84, I had constructed a residential bungalow in Thiruvananthapuram. Unfortunately, I have not preserved the old documents and therefore I am not in a position to submit the cost of construction for computing tax on long-term capital gains. This was around Rs 5 lakh. Now, I have sold this bungalow for a net consideration of Rs 20 lakh and am staying with my father who has a palatial house in Pune. Because of his age, he desires to have my company. I wonder how to compute the tax liability on the long-term capital gains arising out of the sale of the bungalow.

--R R Wagle, PUNE

I wish the property was constructed prior to 1.4.81. In that case, you are allowed to substitute the value of the property on that date in place of its cost. For this purpose, the value as on April 1, 1981, can be assessed by a chartered valuer. For properties constructed or acquired in subsequent years, there is no provision to substitute the assessed value in place of its cost. Many assessees, whose documents are destroyed because of natural calamities like floods or fire, would be facing a similar dilemma. This is a deficiency in the Act that requires to be corrected.

Normally, you will find that the tax authorities, by and large, are extremely reasonable if they find that you are facing a genuine difficulty for no fault of yours. If you represent yourself properly, you may be allowed to substitute the value of the property as on the date when the construction was completed, as assessed by a chartered valuer. However, here you are taking a risk.

I'm afraid that the valuer will take into consideration the fact that since you yourself had constructed the bungalow, your cost would naturally be lower than the price you would have otherwise paid, had you purchased it from a builder. Unfortunately, the value added to the property by your own efforts is not a recognisable cost. The best course of action is for you to invest the entire net sale proceeds in an avenue under the umbrella of Sec. 54EA with a lock-in period of three years.

In other words, I'm suggesting that you take the cost of acquisition of your old house as nil. If you reflect a little, you will find that there is no sacrifice involved at all on your part. As a matter of fact, in case you have any normal investible funds which have nothing to do with capital gains, the best parking place is the same. The only difference is that in the case of 54EA, the lock-in period is three years.

I'm 68 and a retired government servant. My income consists only of pension and interest on MIS and NSC-VIII. This year, I withdrew Rs 50,000 from my NSC account and my income exceeds Rs 1,25,000 for the year 1999-00. Should I file my returns especially in view of the fact that I withdrew Rs 50,000 from NSC making my income go beyond Rs 1 lakh.

--S N Kaila, DELHI

I wish you had given me details. If you have `withdrawn' Rs 50,000 from NSCs, your capital must be around Rs 25,000 and the interest for the last year of its term would be around Rs 5,000. Moreover, interests on MIS and NSCs are exempt u/s 80L up to Rs 12,000. In addition, you can claim standard deduction on your pension. Finally, you as a senior citizen are entitled to claim rebate of up to Rs 10,000 on your tax liability, irrespective of the size of your income. I do not think you are liable to pay any tax. Even if you are, it can be saved by your contributing some specific amount to avenues u/s 88. There is no need for you to file the returns, unless you fall within the 1-by-6 category.

In case a house/flat property is gifted by the husband to his wife, will the rent arising out of this be assessed for IT in the hands of donor or donee?

--R P Gupta, NAGPUR

Gift tax stands abolished but not the gifting provisions. Any income arising out of the gifted property of whatever nature, will suffer clubbing in the hands of the donor if the donor happens to be a parent of a minor or spouse of the donee. I do not advise gifts, especially of real property, unless there are compelling reasons to do so since the transfer and registration charges are very heavy.