Anil Rego, CEO, Right Horizons, answers your personal income tax queries.
Raamu Mohan Srinivasan Radha Krishnan: I have an APY account and an associated PRAN. Can I also open a NPS account? Will the new PRAN associated with NPS cause any discrepancies with my existing PRAN associated with APY? Please help!
Anil Rego: Yes, any Indian Citizen can have an APY account and a NPS account at the same time. Both the accounts will be treated separately, so new PRAN will not cause any discrepancies to the existing PRAN. But a person can't have 2 PRANS for one scheme.
Kailash Dhyani: I'm NRI (Gulf) going to retire in 2022.
I don't want to involve any market related or any other type of investments which create unnecessary hassles/ hazards. I will be jobless once I will be back to India. While retiring, I may have all together 60-70Lakhs. (Around 20L in PPF from past maturing 2023), rest in bank (FDs) & with my employer.
I have NPS AC (Opened recently) & NRI AC too. Someone advised me as soon as you land in India open following AC as you don't want face any risk just simple life.
1. SCSS- 15L (not eligible at present)
2. PMVVY- 15L (not eligible at present)
3. PO MIS- 4.5L (not eligible at present)
4. RBI BONDS-10L (not eligible at present)
5. SBI MIS ---10L ---?????
6. MAX LIFE Retirement plan- ?????. Or SBI PENSION FUND???? --20L.
On retiring NPS will automatically shift to Pension AC right Sir. If I earned around Rs.5 Lakhs from above total funds. Will my earning interest come under "Tax subject" If yes then do I have to pay tax on it?
Anil Rego: Yes, the pension income the above-mentioned funds will be added to your income.
I knew a Snr citizen exempted- 3L for tax. What will happen to my rest 2L earnings from funds (Little confusing)? I may take RS.30-40000/- medical Insurance (currently by employer).
Anil Rego: If the income is 5 lakhs and you don't have any tax saving investments/ deductions, then you will be taxed at 5% on this 2 lakhs.
Do my interest earning money will not come under subject of 80C, 80CCD & others?
Anil Rego: No, interest earned is added to income and cannot get you a deduction (interest from PPF is tax free, though). If this income exceeds 3 lakhs, you will have to pay tax as per the tax slab. You can however invest into avenues covered under section 80 which can help you get a deduction. The point to keep in mind is that tax saving options normally are locked in and may not give you a regular income.
Do Income tax department will cut "TDS ?"
Anil Rego: TDS will be different for different investment avenues. Most taxable avenues would have a tax deducted at source.
We have our own flat, we only need to pay maintenance charge/ Electricity/ House tax & rest our old age basic living expenditures etc.
Kindly advise me keeping in mind I don't want to go for any risk.
Anil Rego: If you do not want to invest in risky avenues, you can go ahead with FD, NPS, SCSS, MIS, immediate annuity plans, etc. But considering the higher inflation, we suggest investing 20% towards moderate risk avenues which helps to deliver return higher than inflation and helps to balance the household budget for a longer term. You can also take help of a financial advisor to plan your retirement.
G V Chandrasekhar: I am working officer in government sector. Recently I suffered from covid-19, for which I received medical reimbursement of Rs.4lacs. Is this amount taxable under income tax act? If yes, how to save tax?
Anil Rego: Medical Reimbursement from your employer is tax exempted only up to Rs. 15,000 above which the amount would form a part of the taxable income. You cannot directly save tax on the same, but could use the deductions available under section 80.
If on the other hand, the medical reimbursement is from a medical insurance company for a policy taken by you, it would be exempt from tax.
Sidha Binayak: My mother stays in Odisha. She is 62 years old. She has a plot which she is selling in INR 40 Lakh. What is the capital gain tax implication in this case? How can she avoid paying the tax?
Anil Rego: If the plot was acquired for a period less than 24 months it is called a short-term capital asset whereas if the period is more than 24 months it is called as long-term capital asset.
Short term capital asset attracts STCG. You can calculate STCG by deducting the cost of acquisition, expenses related to sale, cost of improvements if any from the sale price. STCG is added to your income and thus taxed at your income tax slab rate.
Whereas for a long-term capital asset would attract LTCG. You can calculate LTCG by deducting the indexed cost of acquisition, indexed cost of improvement and any expenses connected to sale. The tax rate applicable in this case is 20%.
Tax Savings for LTCG:
1. By purchasing a new house within 2 years or construct a new house within 3 years.
2. In case you don't wish to buy or construct a new house, you can invest your money on long term capital bonds like Rural Electrification Bonds or the NHAI bonds for a minimum of 5 years. However, you have to buy these bonds within 6 months from the sale of your plot and since the capital gain is below 50 lakhs, this is the most viable option for your mom.
3. You also have the option to set off your capital gain against any previous capital loss from the sale of any previous capital asset.
Ganesh S Melatur: Thank you for all the advice in your column which I find very interesting. I have recently redeemed some mutual fund equity investments that fall into two categories. The first set are those I held for nearly 9 years and the second set is recent vintage as its average holding age is under 4 years.
1. What is the capital gains tax that I have to pay and how is it computed?
2. Is the exemption amount of Rs 2 lakhs available for capital gains also?
3. How to pay the CG tax amount and when is it due for payment?
Many thanks for your advice.
Anil Rego: Answer for 1 and 2
Short-term capital gains on redeeming your equity fund units within a holding period of one year are taxed at a flat rate of 15%, irrespective of your income tax bracket. Those funds exceeding one year holding period is treated as a long-term capital gain. The LTCG are exempted from tax up to Rs. 1,00,000 and any LTCG exceeding this limit shall attract a LTCG tax of 10%, and there is no indexation.
3. Paying capital gains is same as paying regular income tax. You have to go to the Income Tax India website and pay tax using challan ITNS 280.
Narik Agan: I am NRI who returned to INDIA. I still got funds in USA and I want to give gift to some of my immediate relatives. My question is: How much USD can I gift to immediate relatives without having any tax payment for them in India? Thanks
Anil Rego: There is no gift tax in India (including for an NRI) to immediate relatives (spouse, brother or sister, brother or sister of the spouse, brother or sister of either of the parents, any lineal ascendant or descendent, any lineal ascendant or descendent of the spouse, spouse of the persons mentioned above). Both the parties (i.e) the giver and the receiver need not pay any taxes on the gifts. If the gift is in the form of an investment/asset, then the tax liability will shift to the recipient of the gift.
Amit Kumar: I am currently employed in the Maldives and my income is approximately USD 4000 a month. I am paying income tax in Maldives. I would like to know if I need to pay income tax in India as well because I will be sending my income back to India. And if I do not have to pay income tax in India do I have to file my ITR?
Anil Rego: An NRI's income taxes in India will depend upon his residential status for the year. If your status is 'resident', you have to pay the income tax in India; if you are a non-resident, then you need not pay the income tax in India.
Any income that you get in India (eg. On investments, rental, etc) would be taxable in India. Whether you are a resident or non-resident you have to file ITR if your income exceeds Rs. 2,50,000 or if you have short term capital gains.
Vijai Kumar: My daughter in law has a PPF a/c which is maturing on 31.03.2021 and she would like to close it. She has acquired foreign citizenship. She has NRO/NRE account in a bank here. Please let me know what are her tax liabilities if the amount of PPF is deposited in the NRO/NRE bank here and also if later on transferred to her present country of citizenship?
Anil Rego: Your daughter can get the PPF maturity proceeds in her NRO account. In India, there would be no taxes on PPF, but it could be taxed in the country of her residence if needs to include it in her global income.
Dickson Pinto: While filing tax returns, I have forgotten to mention carried forward capital losses for the last 3 years. Returns were filed on time and assessment is complete. The revision time limit is over.
Now, while filing returns for the next year, can I claim these losses or are they lost permanently on account of the above?
Anil Rego: Individuals can generally carry forward a tax loss for the stipulated period, but must claim a tax loss at the first opportunity. If you do not file your tax returns on time, you lose the benefit of carry forward of your taxes.
Arunangshu Dey: I have a Life Time Super Pension Policy of ICICI Prudential with following details:
- Sum Assured: 0 (Zero)
- Premium paid for 1st 10 years and is under extended vesting period.
- Current value of the fund is almost twice the value of total premium paid.
- I understand the maturity/ Surrender Value comes under section 10 (10D) of Income Tax Act 1961.
My queries are:
- If I surrender the policy before the extended maturity, whether the whole SV amount will be tax exempt as the as the sum assured is less than 5 times the annual premium OR in case it is taxable, whether the whole SV or the SV minus my premium payment only will be taxable.
- In case I wait till the extended maturity and opt for annuity, what is the tax implication?
1. It may be noted that a pension plan is taxable. Only life insurance policies with the stipulated life cover would be exempt from income tax. The surrender value is added to the income of the policyholder and offered to tax if he has availed of the tax benefits while paying premium. If he has not availed tax benefits, then the excess of surrender value over the premium paid will be added to income and taxed at marginal rate of tax.
2. If you extended till maturity and opt for annuity, the income will be added to the income of the policy holder and taxed accordingly. You however would be able take the commutation benefit as tax free. IRDA has set a cap of commutation of up to 60% of the corpus in 2019.
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.