'Dividends have now become taxable in the hands of the investor and the earlier exemption limit is longer available.'
Anil Rego, CEO, Right Horizons, answers your personal income tax queries.
Rankanidhi Sahu: I and my younger son have purchased a house at Bangalore. I want to gift my portion of the house to my son. Will there be any tax liability to my son?
Anil Rego: As per income tax laws, a gift of any asset (in this case, a house) made to your son (who is a close relative) is fully exempt from tax in the hand of the recipient, without any upper limit. The liability of tax arises only when your son sells the property.
You would need to factor in some costs while registering the change of ownership.
Anurag Gautam: Can we take indexation benefit for equity MFs if redeeming/selling after 5-6 years. If the answer is no, is it advisable to book gains within Rs 1 lakh every year and invest again?
Anil Rego: Indexation benefit is not applicable for equity mutual funds.
One could book gains of Rs 1 lakh every year to take advantage of the deduction. However, it may be a little cumbersome and would require a bit of planning.
It is advisable to book profits depending on the market conditions to derisk your portfolio.
Ashok Bhargava: I am 62 years old. I have following income for F/Y 2020-21
Pension: Rs 8.08 lakhs
FD interest: Rs 2.28 lakhs
MF dividend: Rs 1.33 lakhs
Shares dividend: Rs 31,000
Shares STCG: Rs 2.88 lakhs
Shares LTCG: Rs 0.62 lakhs
Sir, what will be my tax liability? Investment (80C , 80D, 80 CCB) rebate, TDS I will adjust. I want to know whether still some tax is to be paid.
Anil Rego: Currently, your taxable income without deduction comes to Rs 12 lakhs. Shares STCG and LTCG is not added to the income. These are separately taxed.
After deductions, the taxable income would be Rs 10 lakhs (if 80C and 80D is fully claimed. 80CCB comes under 80C).
In this case, you still have to pay tax. Your tax liability would be around Rs 1.1 lakhs.
Srinivasan Vemban: The tax authorities deducted tax on dividend from mutual funds. I want to know which form should be used for filing (ITR1 or ITR2). I would also like to know the exemption limit for dividend from mutual funds.
Can we file with ITR1 under income from other sources and show the dividend amount?
Anil Rego: Assuming that you have salary income and dividend income, you can use ITR 1 for filing under income from other sources.
Since dividends have now become taxable in the hands of the investor, the earlier exemption limit is longer available.
Ranga Ranga Nathan: I am recently retired after 60 years of age. Please inform how much I have to pay tax on the following:
1. I invested Rs 45 lakhs in FD and am earning interest of approximately Rs 25,000 per month.
2. I have nominal pension of Rs 2,090 per month.
So, how much tax is applicable to me as a senior citizen?
Anil Rego: For a senior citizen, income upto Rs 3 lakhs is not taxable. In this case, your annual income would be Rs 3.25 lakhs.
So Rs 25,0000 over the exemption limit would be taxed at 5 per cent.
If you don't have any investments to claim deductions, then you would be liable to pay tax of Rs 1,254 under the old and new tax regime.
However, if you claim deductions, then you can eliminate your tax fully.
Sheeja Sunil: I need the following clarifications.
1. If the previous year's arrears salary is paid this year, should I include the income in the current return?
2. If the arrears can be filed again in the previous season, what is the procedure?
Anil Rego: Yes, the salary in arrears should be included in the year of its receipt.
However, if such a receipt pushes your income into a higher tax slab, there is an option to claim relief under 89(1) by filling a Form 10E which you can find online.
Please consult a CA/tax consultant if you need help, as this could be a little cumbersome.
Ekambaram Rajamani: 26As for FY 20-21 displays MF dividend paid plus dividend distribution tax by MF companies wherein I have invested in many schemes. But the figures they have displayed do not actually tally with the dividend and DDT the companies have actually paid. What should I do while filing my ITR form -- display the correct amount under dividend and DDT or the amount displayed in the 26AS. I am a senior citizen aged 81.
Anil Rego: You would need to contact the companies to rectify any errors in your 26AS.
If there is any difference in your tax filing vs 26AS, you would get a notice from the income department.
If the difference is very low, then you can decide whether you would like to pursue the case or go by the 26AS statement.
James Pereira: I am having annual salary income of around Rs 20 lakhs. I have to pay the fees for my daughter's MBBS course to the tune of Rs 6.50 lakhs annually. Can I get the full tuition fees paid as deduction from my income while filing my income tax return?
If yes, under which provision of the income tax law?
Anil Rego: You can claim tuition fee deduction under Section 80C to a maximum limit of Rs 1.5 lakhs. This deduction is together with other deductions like insurance, provident fund, etc, under Section 80C. There is no other provision to claim more than Rs 1.5 lakhs under any section for this expense.
You can however choose to take an educational loan and get a deduction on the interest paid on the educational loan.
Joginder Pal: Please intimate if a person above the age of 75 yrs is required to file IT return for the assessment year 2021-22.
Anil Rego: As per the Budget 2021, senior citizens above the age of 75 years, who have only pension and interest as a source of income, will be exempted from filing the income tax returns.
This is provided banks will be responsible for the TDS deduction of senior citizens, after considering the deductions under Chapter VI-A and rebate under 87A.
Shwetank Sharma: I was working from June 2010-September 2017.
In this period, I have filed ITR. But, in September 2017, I have left my job and am pursuing studies now.
Since I didn't have a job since Sep 2017, I didn't file ITR.
Is it fine or I am missing something regarding ITR?
Anil Rego: You do not need to file a return if your income is below the taxable limit.
However, since you were working in the past, it is recommended to file a 'NIL' income return/file a return for whatever income you receive including interest from deposits if you plan to start working again.
This will help you maintain a record for these years and avoid any notices from the department to file your returns.
Do you have any personal income tax query? Please mail us at email@example.com with the subject line 'Ask Anil' and Anil Rego will answer all your tax queries.
Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.
You can find more of Mr Rego's answers here.
Feature Presentation: Ashish Narsale/Rediff.com