The wounds on the body of National Aviation Co Ltd (NACL) have been inflicted by former minister of state for civil aviation Praful Patel. The stable Indian Airlines has been virtually liquidated; Air India, once country's pride, has been breathing heavy.

This alarming development has taken place because of Patel's “forced” merger of the two national carriers. During this difficult time, his oft repeated assurance was that IA and IA were “two equal arms” of National Aviation Co. However, he acted in a totally different manner, removing IA from domestic routes and leaving Air India to bleed before exiting the ministry, leaving the carrier in dire straits.

More than ten of Air India’s accounts have been frozen for nonpayment of dues to several oil companies and other agencies. Its bosses have written to the civil aviation ministry that they need at least Rs 250-300 crore a month to keep the airline afloat and be in a position to disburse salaries to its staff.

The loss-sustaining Air India is burdened with several problems, including lack of discipline in the cockpit, the most sensitive spot. Its pilots who hold a licence for one particular type of aircraft,are flying on another type of aircraft, endangering safety norms. The International Civil Aviation Organization's (ICAO) guidelines say "it is only the good quality of training that ensures flight safety in operations". Sadly this all-important norm is not being adhered to and the monitoring committee has been disbanded with the recent appointment of the carrier’s new chairman-cum- managing director.

In this unstable situation, the new civil aviation minister, Ajit Singh, has gone on record saying airlines are commercial outfits and therefore they should set their own houses in order. How long can the government bail out Air India even though it is an important public sector undertaking?

The situation, as it exists at present, is clear. The national carrier or carriers can be rescued or a turnaround achieved only if the new minister takes a realistic decision of demerging them.

Let Indian Airlines fly in the domestic skies and Air India on international routes, as before. Let them operate independently. Leave them alone to function professionally as commercial outfits after providing them one-time equity. Let there be a level-playing field for all of them.

Q: I teach in a medical college. I purchased a new independent house (built up) in March 2011. I already own another apartment in the same city where I'm residing at present. The new house is still vacant and is neither rented nor occupied for any purpose till date.

I have taken out a housing loan of Rs 49,00,000 from State Bank of India and am paying monthly installments of Rs 47,000 as EMIs (equated monthly installments). For the financial year 2011-12 my total repayment of the housing loan will be Rs 564,240 (comprising interest of Rs. 372,000 and principal of Rs 192,240).

According to the Income Tax Act how much amount can be deducted as interest on a housing loan? Can I can deduct the entire amount of interest paid from my salary, that is, Rs. 372,000, or am I entitled to deduct only Rs 150,000? Or is there any other way of deciding the interest amount to be deducted?

— Uday Narlawar

A: If a taxpayer has two or more residential houses, only one of these of his choice shall be treated as self-occupied. The others will be considered as deemed let out. In the case of interest related with a let out (or deemed let out) house and commercial property, the entire interest is deductible. The limit of Rs 30,000 or Rs 150,000 is applicable only on interest related with a self-occupied house.

However, also note even though the property is under lock and key, a notional rental amount that the property would have earned had it been rented out would have to be included in your total income for the financial year. So with deemed let out properties while there is an advantage in the entire interest being deductible, there is a disadvantage in as much the owner of the property has to pay tax on income that is not earned as such.

Therefore, it would be advisable to actually rent out the property and earn some real income since otherwise you will be paying tax on notional earnings.

Q: I purchased an apartment at Noida in the National Capital Region and, while registering it, I made my wife as co-owner without any payment consideration. Now the apartment is registered jointly in our names and has been let out on rent.

Will the income from the let out house (the rent) be shared between me and my wife (50/50 per cent) or will the entire income go to my account? I understand the provisions of clubbing of income are not applicable when house property is transferred to one's spouse without considerations.

— A.K. Garg

A: You have done nothing wrong by inserting your wife's name as a joint holder of the property as a matter of precaution. However, for tax purposes the owner of the asset is the one who has paid or arranged (with the help of a loan, etc) to pay for it. And the income from such an asset belongs squarely to the owner and not to the person whose name has been added as a joint holder.

Clubbing provisions do not come into the picture here — the beneficial owner is the one who is always liable for the tax.

The author may be contacted at wonderlandconsultants@yahoo.com

Mumbai, January 14
The Reserve Bank of India has set guidelines for compensation of senior bank executives, imposing restrictions on guaranteed bonus, severance pay as well as a cap on variable pay, in line with global moves to rationalize pay structures and curb risktaking.

"The compensation practices, especially of large financial institutions, were one of the important factors which contributed to the recent global financial crisis," the RBI said Sunday.

It said "perverse incentives" have "amplified the excessive risk taking that severely threatened the global financial system". The RBI’s guidelines are in line with steps taken by the global banking regulator to enforce sound compensation practices aimed at reducing incentives towards excessive risk, it said.

The RBI said joining or sign on bonus should only occur in the context of hiring new staff and be limited to the first year and guaranteed bonus should be in the form of employee stock option plans.

Private banks should not grant severance pay other than accrued benefits such as gratuity or pension except in cases where it is mandatory by any statute, the statement said. It added variable pay for chief executives and whole time directors of private banks should not exceed 70% of the fixed pay in a year, and the variable pay can be deferred over a period of three years. A deterioration in the financial performance of banks should generally lead to a contraction in the total amount of variable remuneration paid, it said. — Reuters