Navigating complex tax rules can be daunting. This guide provides clarity on common financial questions, including the taxability of high-value credit card rewards, the specific NPS contributions eligible for deductions under the new tax regime.
l Do I have to pay tax on credit card cashback and reward points? What is the limit?—Deepak Sharma
Currently, the income tax law does not contain specific provisions dealing with credit card cashbacks and reward points. In general, cashbacks are treated as a post-purchase discount and are therefore not taxable. However, if the total cashback received exceeds Rs 50,000, the excess amount may be taxable under the head “Income from Other Sources.”
Reward points redeemed for airline tickets, shopping, or similar benefits are typically not considered taxable. However, if these reward points are converted into statement credit, effectively making them equivalent to cashback, the amount may become taxable if it exceeds Rs 50,000.
l If I opt for the new tax regime, can I get a tax deduction on my and my employer’s contribution to NPS?—Sumesh Behl
If you opt for the new tax regime, you can still claim deduction for your employer’s contribution to NPS under Section 80CCD(2). The limit is up to 10% of salary (basic + DA) for private sector employees and 14% for govern-ment employees. However, your own contribution under Section 80CCD(1) is not available as a deduction under the new regime.
l Will I get a 30% deduction and rebate on the house tax amount for rent received under the new tax regime?—Deepak Kumar Singh
Under the new tax regime, if you receive rental income from letting out a property, you are still eligible to claim a 30% standard deduction as well as a deduction for municipal taxes paid on that property. This can be deducted directly from your rental income.
l I sold some of my agricultural land holdings which I inherited from my father. Do I have to pay any capital gains?—Manoj Kumar
The taxability of capital gains on sale of inherited agricultural land depends on whether it is classified as rural or urban agricultural land. Rural agricultural land is excluded from the definition of a capital asset under Section 2(14) and, therefore, its sale does not attract capital gains tax. In contrast, urban agricultural land is treated as a capital asset, and capital gains tax will apply on its sale.
Since the land was inherited, the cost of acquisition and the holding period by your father will be considered while computing capital gains. Consequently, capital gains tax arises only if the agricultural land sold is urban in nature.
The writer is partner, Nangia & Company. Send your queries to fepersonalfinance@expressindia.com
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.
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