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'Even if LTCG isn't taxable, you still have to...'

August 26, 2022 08:59 IST

Illustration: Dominic Xavier/

Anil Rego, CEO, Right Horizons (external link), answers your personal income tax queries.

Bipin Zacharia Kadavil: I have query on Superannuation. As I am looking completing 15 years of service and if I resign now following queries are coming to my mind:

a) Is Superannuation exempted from Tax? If yes, what is the limit?


b) What is procedure of Transferring Superannuation to next company?

In the same way, please confirm on the gratuity component.

Anil Rego:

a) Superannuation taxability is based on certain criteria:

  1. If you are withdrawing the superannuation amount while leaving the company, the entire amount will be subjected to tax. This will be accounted as income from other sources, added the income and taxed as per your tax slab
  2. If payment is made to the employee as an annuity after the retirement: 1/3rd of amount will be tax free and the remaining annuity will be taxed as per your tax slab at retirement
  3. It is not taxable if payment is made to the employee who is incapacitated by a disability or illness, or other reasons or payments made after death of employees to legal heirs

If both the parties (old and new employer) agree, then you can transfer the amount to new employer, provided the new company has an approved superannuation fund. If not, you can continue keeping the money in the existing superannuation account.

b) Gratuity is exempt from tax on the least of the following:

  1. Up to 20 lakh currently: Last salary (basic + DA)* number of years of employment* 15/26
  2. Actual Gratuity received
  3. For government employees, gratuity is fully exempt from tax.

Subbiah Murugan: I am an NRI. So far I have not filed any income tax. My Indian income is INR 19000 per month through rental income.

I am having a resident demat account and having stocks. I have few MFs for which money is deducted from my wife's resident bank account. My wife is not working and she is with me. I am also having SSY for my daughters and continuing.

Is it okay to have the above accounts being an NRI? Can you please advise course correction if needed?

Anil Rego: NRIs need to convert their accounts to a Non Resident Account status for all their bank accounts and also for their mutual fund and demat accounts. You can approach the respective financial institution to change your status. It may be noted that for NRIs, tax will be deducted at source.

Sarvesh Prabhu Konkar: I had redeemed all units of Mutual Funds in the month of January 2022 when Sensex was at its peak. Since more than 1 year has passed since the SIP installment started this comes under Long Term Capital gain. The long term capital gain is less then Rs 1 Lakh. As per Income tax rules these capital gains of up to Rs 1 lakh a year are tax-exempt. Do I still need to declare this amount while filing Income Tax returns for the financial year 2021-2022 or only if the long term capital gain is above Rs 1 lakh this amount needs to be declared while filing Income Tax returns for the financial year 2021-2022?

Anil Rego: Even if your long term gain doesn’t exceed 1 lakh and there is no capital gain applicable for the sold mutual funds, you need to show this gains during the filing of FY2021-22 and claim an exemption up to Rs 1 lakh.

You can find more of Mr Rego's answers here.

Note: The questions and answers in this advisory are published to help the individual asking the question as well the large number of readers who read the same.

While we value our readers' requests for privacy and avoid using their actual names along with the question whenever a request is made, we regret that no question will be answered personally on e-mail.