Interest on NSCs taxable

SC Vasudeva

Q. Please clarify the following points:

a) A person has a total income of Rs 6,00,000 and Rs 1,50,000 savings under Section 80C. The net taxable amount comes to Rs 4,50,000. Is he eligible for rebate of Rs 2,000 under Section 87A?

b) Is interest received from the National Savings Certificates (NSCs) taxable or non-taxable under Section 10(15) being saving certificates?

— Harbhajan Singh

A. Your queries are replied hereunder:

a) Yes, he would be eligible to claim a rebate of Rs 2,000 from the amount of tax payable as his total income does not exceed Rs 5 lakh.

b) Interest earned on National Savings Certificates is taxable and is not exempted under Section 10(15) of the Act.

Q. I received Rs 10 lakh as maturity value of Kisan Vikas Patras and deposited the post office cheque in my bank account.

Out of the above money, I deposited Rs 5 lakh in my wife’s account in the bank as a gift/goodwill gesture.

Please advise on the tax liabilities of myself and my wife both. What further action am I required to take?

— SL Gautam

A. a) The income accruing on the amount of Rs 5 lakh gifted to your wife shall be clubbed with your income in accordance with the provisions of Section 64 of the Income-tax Act, 1961 (The Act). You should, therefore, include the same while preparing your income-tax return for the Assessment Year in which income on the gifted amount has been received. It may be noted that such income will continue to be clubbed with your income for the purposes of computing your total taxable income.

b) It is presumed that interest due on Kisan Vikas Patras was declared on accrual basis in the earlier years. In case the same has not been so declared, the amount of interest accrued and received at the time of maturity should be included in your total taxable income.

c) Letters for the gift to your wife and acceptance of such gift by your wife should be exchanged.

Q. Kindly calculate the tax liability of a 68-year-old (senior citizen) pensioner for the current financial year as per data given below.

Total income (pension): Rs 5,34,000

Income from FDs: Rs 36,000

Total: Rs 5,70,000

Donation to a registered charitable society — Maharaj Jagat Singh Medical Relief Society.

— Dr Ajit Singh Kaler

A. You would be liable to pay an amount of Rs 35,020 as income tax and education cess on total income of Rs 5,70,000. The amount donated to a charitable society has not been indicated in your query and therefore, no deduction has been taken into account while computing the tax payable on the total income of Rs 5,70,000. In case the charitable society has given you certificate with regard to exemption allowable for donation received by it, 50% of such donation would be allowable as deduction from the total income of Rs 5,70,000. However, if the donated amount exceeds 10% of the total income (without allowing the deduction for donation), the deduction to the extent of 50% shall be admissible with reference to such 10% of the total income.