Rs 3,500 interest on PO savings a/c tax-free

SC Vasudeva

Q: How much interest earned on a post-office (PO) savings account is exempted from income tax? If a savings bank account interest is Rs 16,000, how much will be included in my taxable income Rs 16,000 or Rs 6,000 (considering the rebate up to Rs 10,000 during the financial year)? — Sohan Pal Arora

Your queries are replied hereunder:-

a) Interest earned on a savings account with post office is exempt to the extent of Rs 3,500 in the case of an individual account. In case of a joint account, the exempted amount is Rs 7,000.  This exemption is in terms of Notification No. SO 1296(E) dated June 3, 2011.  It may be added that the amount of interest on post-office savings account can also be included for the purpose of allowing deduction under Section 80TTA of the Income Tax Act 1961.

b) Interest earned on a savings account with a bank is covered under Section 80TTA of the Act for the purpose of deduction to the extent of Rs 10,000.  Accordingly, the amount of interest earned in your case being Rs 16,000, only Rs 6,000 will be includible in your total income after allowing deduction of Rs 10,000.

I am a Punjab Government pensioner aged 89 years. My income from pension during the financial year 2016-17 would be Rs 6,50,000. I have deposited Rs 1,50,000 in PPF.

My estimated income from interest on bank fixed deposits would be Rs 1,00,000 and the bank would likely to deduct tax (at source) at 10 per cent. Do I need to request the bank to deduct tax at 20 per cent as I come under the 20 per cent tax rebate bracket? Or if I deposit the balance 10 per cent tax under self-assessment provisions before the last day of filing tax return, will there be any penalty on interest? — Gurnam Singh

A senior citizen is not required to deposit advance tax, in case he does not have any income from business or profession. Therefore, in your case the balance amount of tax can be paid under self-assessment provisions before filing the tax return.  No penalty on interest would be leviable in such a case.

I purchased 500 listed shares of company A at a price of Rs 200 per share on May 30, 2016. The company gave bonus shares 1:1 on July 25, 2016. Now, the market price of the shares is Rs 120 per share. Can I sell the 500 shares of company A at Rs 120 per share now with a short-term capital loss of Rs 40,000 while holding on the additional 500 bonus shares? — Vikas

You can sell 500 shares of a listed company originally purchased by you and carry forward a short-term capital loss of Rs 40,000 incurred on account of sale of such shares.  It may be added that 500 bonus shares allotted to you would have a nil cost and as and when sold, the entire amount of sale proceeds shall be taxable as a short-term capital gain if these are sold within one year of the date of allotment.