LTCG up to Rs 1,00,000 exempt

SC Vasudeva

Q. I am a retired senior citizen. I purchased 400 master gain shares of Rs 10 each of UTI in 1990 for income-tax rebate purpose. Some tax-free dividend was paid to me on these shares.  The UTI repurchased these shares in 2018 and paid me Rs 40,000. My query is whether any tax is payable on LTCG on these shares and how much LTCG is exempt in a year. Which ITR form should I file to show these gains? Please advise whether dividend is exempt from payment of tax. - Lakhbir Kaur

A. (a) Dividend on master gain units of UTI is not chargeable to tax.

(b) In accordance with the provisions of Section 112A of the Act, long-term capital gain to the extent of Rs 1,00,000 is exempt from tax. The long-term capital gain in your case being less than Rs 1,00,000, the same would not be chargeable to tax.

(c) The ITR No. in your case should be ITR-2.

Q. If one deposits Rs 1.5 lakh in our account and another Rs 1.5 lakh in his grandson’s life insurance account, can he claim income-tax benefit for both and under what section? — Amarjit Singh

A. Deduction under Section 80C of the Income-tax Act, 1961 (The Act) is allowable to the extent of Rs 1,50,000 only. No further deduction is permissible under the provisions of the Act.

Q. Our corporation is deducting tax on leave encashment whereas it is exempted to Punjab government employees. The employees of the corporation are getting the same scale and DA as is being announced by the Punjab government. The corporation says we fall in ‘other’ category not government employees, which seems to be unfair under the Income-tax Act because only Rs 3 lakh is exempted to corporation employees and whole amount of leave encashment is exempted in case of government employees. Please advise as to whether this disparity is as per Income-tax Rules or the corporation is misinterpreting the rules. — Kiran Gupta

A. The contention of the corporation is correct as Section 10AA(ii) of the Act contains provisions for the exemption in respect of the amount received towards leave encashment by employees other than employees of Central/State government.  It specifically provides that the exemption for such employees shall be limited to period of earned leave to the credit of the employee at the time of retirement as does not exceed 10 months calculated on the basis of the average salary drawn by the employee during the period of 10 months immediately preceding the retirement or Rs 3,00,000, whichever is less. The employees of the public sector undertakings are not considered as government employees even though their pay scale, etc. is on the similar lines as that of Central/State governments.

Q. I am a senior citizen and retired employee. I have around Rs 15 lakh in FDs in a bank and Rs 1.50 lakh in post office under Senior Citizen Savings Scheme. I have also saving accounts in banks/post office. I am getting monthly pension of Rs 4,515 from EPF authorities. Please let me know what income tax relief I will get on my FDs from bank, income from post office and pension for the financial year 2018-19. — PK Bansal

A. Interest earned on FDs with bank, on amount deposited with post office under Senior Citizen Savings Scheme and interest received from savings bank account would not be taxable to the extent of Rs 50,000 for assessment year 2019-20.  The amount of pension received by you under Employees Provident Fund Scheme would be taxable. I may add that there is an opinion by a few tax experts that the amount of such pension is not taxable. However, this aspect is yet to be decided by the SC.