Q. I am a senior citizen. My father had invested in shares in the joint names of my father and eldest brother. They were bought more than 25 years ago. Upon my father’s death, the shares have been equally distributed between me and brothers. Will a sale attract capital gains tax?
Kiron Karnad
A. Yes. Capital Gains is attracted on the sale of shares that you have inherited from your father and the same will be taxed at 20% as STT is not applicable in case of transmission of shares.
Q. I had traded in intraday stocks and options in the last financial year and made some losses. I understand that it is necessary to show all your intraday and derivative trades in the I-T filing (as business income) and this also helps in carrying forward the losses. I have been reading about the subject for some time now. But the more articles I read, the more I am getting confused, especially regarding whether the books have to be audited in the case of intraday and derivatives trading in certain scenarios. I didn’t have any income in the last financial year other than interest income from bank deposits and my total taxable income is less than ₹2.5 lakh. Will I have to audit my books? Also, which ITR should I file?
Vivek
A. Tax audit will apply when your trading turnover exceeds ₹10 crore if your cash payments and receipts are lower than 5% of your gross receipts and gross payments from AY 22-23. For tax audit cases, ITR-3 is applicable to be filed. No other ITR is applicable for an individual who has trading income and is falling under the criteria of tax audit applicability. Turnover in the case of intraday trading is absolute turnover which is the sum total of total profits plus total losses made on daily transactions. For futures and options, the total of favourable and unfavourable differences shall be taken as turnover. Premium received on sale of options is also to be included in turnover and in respect of any reverse trades entered, the difference thereon should also form part of the turnover and further intraday trading is considered to be speculative business.
Q. I am 82 years old, retired and without a pension. My daughter recently received the maturity value of her policy. Of the proceeds, she wants to give me ₹4 lakh for my medical expenses. Will either of us be liable to pay tax? If I invest the funds in a fixed deposit and earn interest, what is the tax liability?
Subramanian Seshaiyer
A. Transfer of money from daughter to father as a gift is not taxable for both the donor and the donee. The interest accruing from the FD made by you out of the gift proceeds is taxable in your hands. As you are a senior citizen, interest from deposits in banks/post offices are deductible up to ₹50,000 under Section 80TTB of the Income Tax Act, 1961.
Q. My wife has taken a life insurance policy from a private sector company, for which she has been remitting the premium. As she has not been claiming the premium amount for income tax relief u/s 80C, can I avail of that benefit? If the answer is in the negative, please suggest any alternative that exists.
Kamath
A. No, you cannot avail yourself of the benefit of deduction under Section 80C of the Income Tax Act, 1961 as the payment is not being made by you, even though she does not claim the same in her I-T assessment. You will have to make the premium payment to effect or keep in force the insurance on the life of your spouse. In other words, you have to pay the insurance premium and claim the benefit.
Q. While calculating deduction under Sec 80g, should standard deduction be reduced by the pensioner for arriving at gross total income?
T.K. Kannan
A. For the purpose of arriving at the gross total income for capping the deductions under Section 80G of the Income Tax Act, 1961, portions thereof on which income tax is not payable under any provisions of the Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of the Act is to be reduced for computing the 10% cap of the deduction quantum under this section. As standard deduction is deductible under the provisions under the head “Income from Salaries”, the same is to be reduced while arriving at the gross total income for the purposes of this section.
Q. I had purchased a money-back life insurance policy in 1995. On maturity, the company gave a certain final amount. Is this taxable?
Noonhil Unnikrishnan
A. As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a life insurance policy, including bonus is exempt. You are to note that this exemption is available only if the premium paid is lesser than 10% of the sum assured if the policy is taken on or after April 1, 2012 and in case of policies dated between April 1, 2003 to March 31, 2012, the policy paid amount is to be lesser than 20% of the sum assured.
Insurance companies are required to deduct tax (TDS) only if the amount so paid is not covered under Section 10 (10D) of the Income Tax Act, 1961 and such amount exceeds ₹1,00,000
(The author is Partner, GSS Associates, Chartered Accountants, Chennai)
