ASK MIHIR: 'Can NPS get extra tax benefit for me?'

Do you have a personal income tax query?

Mihir Tanna, Associate Director, S K Patodia & Associates (external link), a chartered accountants firm that offers consultancy, audit and tax services, will answer your queries.

Please mail your queries at getahead@rediff.co.in with the subject line Ask Mihir and Mihir Tanna will answer all your tax queries.

Subramaniam Natraj: Kindly let me know whether Senior Citizens staying in their own house are allowed to claim any deductions towards Property Tax Paid and Monthly Maintenance paid to RWA from their IT Returns. I shall be grateful for your prompt Mihir Tanna on the above matter.

Mihir Tanna: No. Payment of municipal taxes are not allowed as deduction only for taxpayers having income from rent.

Vina Vin: I have to sell some shares of a particular large company, originally purchased in 1970 and thereafter getting increased through Bonus Shares in different proportions till last in Aug 2016. Meanwhile the company has also changed its face value from Rs 10 to Rs 1 per share in 2003-2005 or so, and thus increasing the no. of shares. Now I only know about the total nos of shares I have presently.

My query is:

1. How to calculate its purchase cost, capital gains and taxable income?

2. Is LTCG rule for Grandfathering applies in this case also by taking FMV on 31.1.2018 of this share?

3. If I want to sell partially does FIFO rule to be taken for calculating capital gains apply?

4. What will be the taxation process (better if it can be illustrated by example with dates as above for better understanding) and to be shown under which schedule & in which ITR form no.

Please enlighten me about the same as utter confusion is there.

Mihir Tanna: I understand that you have sold listed shares and all corporate actions took place before 31st January 2018, hence capital gain earned after such date will be taxable.

For example: Today you hold 100,000 shares of that company, FMV as on 31st January 2018 is Rs 200 and today if you transfer 10,000 shares through recognised stock exchange at shares Rs 300, Capital gain of Rs 10,00,000 will be taxable on FIFO basis.

You have to show such gain in 112A schedule (acquired before 31st January 2018) under the Schedule CG.

Asma: I am getting full tax benefit under 80C for home loan. Can I open NPS account for more tax benefit under 80ccd? I am salaried person.

Mihir Tanna: Yes, you can get a benefit of Rs 50,000 by investing in a Tier I account of NPS.

Dinesh Nayak: I bought an insurance policy with single premium of Rs 97048 and tenure of 9 years. The sum assured was Rs 130,000. Gross maturity proceeds were Rs 11,1348. There were two survival benefits of Rs 19,500 each at 3 year intervals.

In my layman’s understanding, my income from this policy is Rs 11,1348 minus single premium of Rs 9,7048, that is, Rs 14,300. But LIC is deducting TDS by adding the two survival benefits to this, that is, Rs 14,300 plus Rs 19,500 plus Rs 19,500 amounting to Rs 53,300. My question is, should I report Rs 14,300 or Rs 53,300 as my income from this policy while filling my ITR. AIS shows Rs 53,300.

Mihir Tanna: Money received against insurance policy (which covers life) is fully taxable, wherein the premium is more than 10% (in case policy issued after 1st April 2012 or 20% (any other case) of the sum assured.

As premium paid by you is more than specified limit of sum insured, provisions related to exemption of amount received and deduction of premium paid is not available.

Accordingly, you have to pay tax on entire income i.e. survival benefit and amount received above amount paid by you i.e. Rs 53,300.

Vipin Kumar Wahi: I would be grateful if you could provide some clarifications for the given queries:

1) What will be the implications, if the primary holder aged 76 years, encashes the matured FDs?

2) Will there be any tax deduction if the matured FD amount is transferred to the bank and not withdrawn?

3) Will there be a tax deduction if the whole amount (approx 12 to 13 lakh) is withdrawn from the bank?

4) What is the cash withdrawal limit in a year without getting any tax liability?

5) Once the TDS/TCS on the Fixed Deposit is deducted at the bank, then does the bank also charge any tax for the maturity amount deposited in the bank and not withdrawn?

6) Once the TDS/TCS on the Term Deposit is deducted at the post office, then does the post office bank/savings bank also charge any tax for the maturity amount deposited in the bank and not withdrawn?

Mihir Tanna: Tax is always on the income portion. So in your case, interest income will be taxable on accrual system or cash system (as chosen by you for such Income).

Usually taxpayers offer income on accrual system as per Interest Certificate issued by the bank (irrespective of the fact that interest amount will be credited to bank on maturity).

If you choose not to renew FD, the amount will be credited to your savings account and on that balance also you will earn interest as per rate of interest for savings account. Savings Interest Income is also taxable above Rs 50,000 for senior citizens.

Interest Income is taxable irrespective of the fact you withdraw amount from bank account and bank will deduct TDS on interest in deposit (not on savings interest).

You can read more of Mihir Tanna's responses here.

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