What are exchange-traded funds (ETFs)? Can I use a demat account to trade in them?
ETFs are open-ended mutual funds (MFs) and are listed and traded on a stock exchange like any other stock. These funds invest in the market in the same proportion as the constitution of an index. The price at which ETF units are traded depends on demand and supply with Net Asset Value (NAV) of the units at the underlined value. An ETF is not transacted on its NAV but on its market price, determined by the market. To trade in ETFs, you need a demat and a broking account. Buying ETFs online is similar to buying stocks. For example, type SPICE to find the symbol code of ICICI Prudential SPICE Fund, and trade on it.
When I asked a friend to return a blank cheque I had given him some time back, he said he had destroyed it. I want to be absolutely sure about it. How can I cancel a blank cheque?
—V. Verma, email
The ideal way to deal with this situation is to give a stop-payment request to your bank. You may place this request in writing or on the Internet, which generally involves zero cost. Some banks also provide this facility through phone banking.
I fed in a request for withdrawal of Rs4,000 from a Syndicate Bank automated teller machine (ATM) on a Sunday, but it dispensed only Rs2,500. It was not working the previous Friday and Saturday. I complained to the bank about the shortfall in the dispensation on Monday. The bank claims that as per its records, the ATM machine dispensed the amount requested for. What steps should I take to recover the Rs1,500 I did not get?
—B. Venky, email
The most important piece of paper in your case would be the ATM receipt that you got after transacting through the ATM machine. You should approach the bank officials and file a complaint in writing. Bring the issue to the notice of the branch manager. If you feel that your complaint is not being redressed, you can take up the issue with the regional office concerned. If you are not satisfied with the action taken at the regional office, you may approach the official designated to deal with such complaints at the head office of the bank. As a last measure, you can approach the banking ombudsman in the state in which the ATM is located.
How can I close a demat account if there is a pending demat request? I believe demat accounts should be zero balance before they can be closed.
—Ashish Adukia, email
To close a demat account, the account holder needs to either sell all the shares lying in it or move them to another account. Next, he needs to submit an account closure request form signed by him to the depository participant, mentioning the reason for placing the request.
I live in a small town and have a salary account with the State Bank of India (SBI). The bank does not provide electronic clearing service (ECS) and online banking facility in my town. Can I transfer the account to a nearby city, where I can avail such facilities? Will the bank allow it? What is the procedure for this?
From your question, one gets the impression that the branch is not computerized and, hence, is not connected with the core banking facility. You should remember that you have a salary account at the particular bank branch because of your association with your office. The decision to transfer your account to another branch is entirely yours. You can certainly do so. However, you should check with your bank if you can enjoy the benefits of a salary account in the new branch. This is very unlikely because organizations enter into agreements with a particular branch and not the entire bank.
Do I have to pay tax on the provident fund I have from my previous employer? I worked for six years.
—S. Srinivas, email
Assuming that you were a member of a recognized PF, the withdrawal of the gross amount from the PF account on voluntary resignation from the job after rendering continuous service of six years (more than the stipulated minimum period of five years) will not be taxable in your hands. In addition, at the time of switching jobs, the employer gives the option of withdrawal or transferring the balance in your PF account to your new employer.
If the accumulated balance is transferred to your individual account in the recognized provident fund maintained by your new employer, it will be exempt from income tax, irrespective of the period of your employment.
I am a portrait artist and work on a contract basis with two shops to make portraits of customers. I am paid a fixed sum on a daily basis, irrespective of the number of portraits I make. Is this amount taxable as salary?
If any person (agent) has to work under the direct control and supervision of another person (principal) and cannot make decisions regarding the performance of duties, the agent is deemed to be an employee and the remuneration payable to them is taxable under the head ‘Salaries.’ On the other hand, if the principal exercises only supervisory control in respect of the work entrusted by them and the agent has wide discretion in the execution of the work, the presumption is that the person is not an employee. The remuneration in this case is taxable under the head ‘profits and gains from business or profession.’ However, no firm rule is laid down and each case is valued on its own merits. Based on the facts given by you, your income is taxable under the head ‘income from profession.’
My son left for Australia this year. He has opened a Non-Resident External (NRE) Account with HDFC Bank. Now I have come to know that he shall be treated as an Indian resident for this year for the filing of his return. How is it possible that he is treated as a non-resident by the bank under the Foreign Exchange Management Act (Fema) but still remains a resident under the Income-Tax (I-T) Act? Also, is the interest on the amount in the NRE account taxable?
—Ramesh Singh, email
Residential status is a different concept under the Income-Tax Act and under Fema because they serve two different purposes. Therefore, it is possible that a person may be a non-resident under Fema but remains a resident for filing I-T returns. The criterion for deciding the residential status depends on the objective. For example, under Fema, a person may become a non-resident simply by leaving India to take up employment outside India, or for any other purpose that would indicate his intention to stay abroad for uncertain periods. But the I-T department has different rules. So, it recognizes a person as a non-resident Indian (NRI) only if the person fulfils the conditions prescribed by it. Banks follow rules under Fema for the purpose of opening an NRE bank account. It may be noted that the exemption given in relation to interest earned on balance in an NRE account has no relation with the residential status as per the I-T Act. As per Section 10(4) of the I-T Act, any interest on the amount standing in the NRE account in any bank in India is exempt from tax.
Can I claim the benefit of housing loan as well as house rent allowance (HRA) deduction if I am living in a rented house in one city and paying an equated monthly instalment (EMI) for a house located in some other city?
—Kaushik Datta, email
Yes, you can claim the benefit of HRA exemption as you are living in a rented accommodation. You only need to submit proof of rent receipt to your employer. The repayment of principal amount of loan will qualify for deduction under Section 80c of the Income-Tax Act, 1961, provided the amount has been borrowed from a recognized home loan lender up to a maximum amount of Rs1 lakh. You will not be eligible to get the deduction for payment of interest on the borrowed capital until the house is completed. However, the accumulated balance of interest paid during the construction period can be divided in five equal parts and claimed as deduction in the five years starting with the year of completion of construction.
After the house construction is complete, you can claim the interest on borrowed capital under the head ‘income from house property.’ There is no limit to this amount in case the house is given on rent. However, the maximum amount is restricted to Rs1.5 lakh in case the house property is self-occupied.
I am a government schoolteacher and I have received the best primary schoolteacher award from the state government. Will the award sum be taxable?
As per Section 10(17A) of the Income-Tax Act, any amount given, in cash or kind, as an award instituted in public interest by any government is exempt from income tax. So, you do not have to pay tax on the award money you have received from the state government.
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