| |
 |
Tax
Advice |
 |
by S.C. Vasudeva
Income from gifted money taxable in donor’s hands
Q. I retired from government service on 31.03.2006. In October 2005, I withdrew 90 per cent amount of Rs 5 lakh from my GPF account. I issued cheque in favour of postmaster for investing this amount in name of my wife under MIS. Now she is earning interest every month since October 2005. This interest is being deposited by the post office in her saving account. Please advise if the interest earned by her is to be clubbed with my income or not. Further, I am to receive about Rs 5 lakh on account of gratuity and leave encashment. I want to gift this amount to my wife, sons and daughter-in-laws. Please advise me regarding the process to be adopted by me to save me from any tax liability. Devinder Singh, Amritsar A. The amount of interest earned by your wife will have to be clubbed with your income on account of the fact that the funds deposited with the post office were provided by you. Any gift made to your son, wife and daughter-in-law would not involve any income tax liability in the hands of donor or donee. However, the income arising from the amount gifted by you to minor son, wife and daughter-in-law will be clubbed in your income in view of the provisions contained in the Act. I may add that income on the interest so clubbed shall, however, be taxable in the hands of the donees. Tax deducted at source
Q. I opened an SCSS account in SBI in April 2006. But Bank did not deduct TDS on interest earned by me till 30.06.2006. I want that the bank should deduct TDS. Please guide me as to how I instruct the bank to deduct TDS on my SCSS. — Adarsh Nagae, Jalandhar A.
It is incumbent upon the bank branch to deduct tax at source on the interest payable to you if the amount of interest exceeds Rs 5,000. If the bank has not deducted tax at source, the bank will have to bear the consequences in the shape of penalty as well as interest. I am not very sure that the bank would go in accordance with your directions as the bank may not like to go against the law. However, in case you are a senior citizen and your income is below taxable limit applicable to senior citizens, you may apply to the bank in Form 15H, which will enable the bank to avoid the deduction of tax at source in your case. Eligibility of FDRs
Q. Kindly clarify the following points: (1) In the tax proposals for 2006-07, it is proposed that investment made in FDRs with nationalised banks for five years or more will also be taken into account under Section 80C for tax exemption. Has this provision been finally approved and such deposits made during the financial year 2006-07 will be so accounted for? (2) If the income of a senior citizen for the financial year 2006-07 is Rs 2,82,000 and he invests Rs 1 lakh in the schemes covered under Section 80C. Will he be required to file income tax return or not, as the net income will be below Rs 1,85,000 (exemption limit for senior citizens)? — B.L. Kanga A. Section 80C of the Act has been amended so as to include the making of the term deposit for a fixed period of not less than five years with a scheduled bank in accordance with the scheme framed and notified by the Central Government. However, this benefit is within the overall limit of Rs 1 lakh. This amendment is applicable for the assessment year 2007-08 relevant to the financial year 2006-07. In view of a proviso added to Section 139(1) of the Act by the Finance Act 2005, you will have to file the return as your income without allowing deduction under Section 80C of the Act (being part of Chapter VI-A) would exceed the maximum amount which is not chargeable to income tax. Income below limit
Q. Kindly clarify whether an assessee is supposed to file the income tax return even if his/her income comes within the permissible limit after retirement/becoming senior citizen. If not, please further clarify if the assessee is supposed to inform his respective authorities that he is not filing the returns as his income has come within permissible limit after retirement/becoming senior citizen. — G.R. Mahay, Jalandhar A.
In accordance with the provisions of Section 139 of the Income Tax Act, 1961 (the Act), every person if his total income during the previous year exceeded the maximum amount which is not chargeable to tax, is required to furnish a return of his income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. In view of the above requirements, in case the total income without claiming any deduction under Section 10A or Section 10B or Section 10BA or Chapter VI-A of the Act of various assessees exceeds the maximum amount which is not chargeable to income tax, you will have to file return of income in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. The Act does not include any provision which requires the filing of any information in case an assessee’s income is not taxable on account of such income being below taxable limit without claiming deductions/exemptions as aforesaid. Tax liability
Q. I joined ULIP-1971 in 1991 for a target amount of Rs 60,000 and the annual contribution was Rs 4,000 for a period of 15 years. The investment matured in February 2006, and I received Rs.1,61,661.14. The statement of account provided by the UTI shows Rs 29,031.45 as long-term capital gain (LTCG) and Rs 4500.01 as short-term capital gain (STCG). Is the maturity amount free from tax liability? If not, how much will be my tax liability on the said amount and how to calculate it keeping in view the inflation. — Ashok Kumar, Panchkula A. On the basis of statement of account received from the UTI, you will have to declare LTCG of Rs 29,031.45 in your income tax return as well as the STCG of Rs 4,500.01 and pay the tax on the basis of the rates specified by the Finance Act 2006. The maturity amount includes the amount contributed by you towards the purchase of units. The capital gain is computed on repurchase of such units which were purchased on your behalf out of the contribution received from you. Accordingly, the amount of capital gain (both long term and short term) is taxable and the balance being return of capital will not be taxable. I may add that the statement of UTI would have definitely considered the indexed cost of the units purchased every year out of your contributions and therefore, no further inclusion is required in your total income except for the aforesaid two sums of the long-term and short-term capital gains.
|
