Anil Rego, CEO, Right Horizons (external link), answers your personal income tax queries.
SANGAPPA HANCHINAL: My daughter is working in an MNC company in India. In FY 2021-22 she was awarded qty-14 of RSU stocks of her company amounting to INR 19,870.
As per the company, RSU awarded are under "sell to cover" category to recover the tax liability @31.2%. On crediting the shares in my daughter’s demat account broker sold shares equivalent to 31.2% tax and recovered the amount.
Again company shows the RSU equivalent amount in her form 16 against 'income from other sources' head and deducted tax @31.2%.
Under the DTAA with USA, she had filed her ITR (with supporting form No 67 to claim refund under sec 90) claiming the double tax deducted by the company of around INR 6,201, but the IT department did not consider her tax refund and instead sent a demand notice of INR 680.
On receiving a notice under sec 143(1) she replied that "not accepting their demand with relevant words".
Sir what next?
Anil Rego: One would need to file an appeal. This case would require you to consult an auditor / consultant who can make this appeal. You should evaluate the cost of such appeals and proceed only if it makes sense commercially.
Deepak Suri: My queries are:
1. I invested Rs 20,000 in long term infrastructure bonds in the year 2011 for a period of 10 years under cumulative option. The bonds matured in Dec 2021 and I received Rs 44,624 after deduction of TDS of Rs 2,736. An amount of Rs 27,360 is being shown in my AIS as income from other sources.
2. I have been showing the interest accrued every year on this investment in my IT return for the past 10 years as interest income. However now this year I am again required to show the lump sum amount as income and pay tax on it since it is being reflected in my AIS and 26 AS.
3. IS THERE ANY WAY THAT I DON'T HAVE TO PAY DOUBLE TAX since I have already paid tax as accrued interest over past 10 years. How to reflect same while filing IT. I have filed ITR 2.
Anil Rego: The taxpayer is given an option to offer for tax his income either on the basis of accrual or on receipt basis as per the accounting method consistently followed. As you have already offered the interest on these bonds on accrual basis, the same is not to be taxed on receipt basis.
As far as disclosure in form No. 26AS and AIS it is likely that you may get a notice from the income tax department on the mismatch, which would need to be explained. Thus, accrual system could be procedurally cumbersome if there is a mismatch of TDS between years.
Rakesh Bandadka: Can you please let me know if one has been removed from job as the business outsourced the job to third party then is the employee paid some amount as compensation? An agreement was signed stating that with receiving the said amount the employee will not sue the company (employer) for whatsoever reason it may be. Can this compensation received be shown as compensation for relinquishment of right to sue and tax exemption be claimed -- considering the compensation received to be capital receipt, though not shown (form 16) so by the company (employer)?
Anil Rego: I will not comment on labour laws related areas on the applicability of severance pay. With respect to taxability: Unfortunately, there is no provision that exempts tax on compensation payment for redundancy to employees other than a qualifying voluntary retirement scheme as per Section 10 (10C) of the Income Tax Act, subject to fulfilment of conditions and capped at Rs 5 lakh.
If your severance payout is not as per any qualifying scheme, the entire amount will be taxable at your marginal tax rate.
Sudhir Prabhakar: I am a senior citizen with 72 years of age. My wife and I have JT FD A/cs (Many FDs) with a nationalised bank for a period of 10 years. My wife is the 1st holder and I am the Jt second holder. All FDRs are under Quarterly Interest Plan with interest accrued every quarter is transferred to her single SB A/c.
I also have single saving bank A/c with the bank. My wife passed away 4.5 years back. I was told by the Bank that as per RBI Guidelines I need not close the FD A/cs till maturity. As per my wife's will, now, all the interest accrued is being transferred to my single SB A/c.
IT Dept has also approved me as the legal heir for my wife’s income. This income is added to my income every quarter. As my wife is the 1st holder in all the above mentioned FDRs, TDS is being deducted every quarter from this interest on my wife’s name. I deduct this TDS and pay remaining income tax on my total income (including my wife’s income) but I receive the Demand Notice for the amount equal to the TDS deducted on my wife’s PAN for the last 3 years.
I request you to suggest solution to this problem and oblige.
Anil Rego: If the joint account is under the "either or survivor" option, one can provide the death certificate of your spouse and get her name struck off and you could continue as a single holder and you will get the maturity proceeds and interest in your name. One need not terminate the account.
You can find more of Mr Rego's answers here.
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