In some instances, filing of income tax return may not be mandatory
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My mother is 73 years old and has a Permanent Account Number (PAN) but does not file tax returns. She has an annual income of about Rs60,000 from fixed deposits. Apart from this, rental income from a house that would be let out from April 2017, will also come to her. The rental amount will be Rs20,000 a month. She has not availed any loan against the said property. Will she have to file a tax return for the fixed deposit income for this year (2016-17), and for both the incomes from next year (2017-18)?
For an individual, whose total income during the relevant financial year exceeds a specified income threshold or who holds specified overseas assets, filing personal tax return within the specified due date (section 139 of the income tax Act) is mandatory. We have assumed that:
a) your mother currently does not hold specified overseas assets and
b) she has no other income/losses other than those specified above.
Further, for a senior citizen (age 60 years and above but below 80 years) like your mother, the aforesaid income threshold for FY2016-17 and FY2017-18 is Rs3 lakh. In light of the above, your mother’s gross total income during the FY 2016-17 is not likely to exceed Rs3 lakh, and it is not mandatory to file tax return for the said financial year.
If any taxes are deducted by the bank from the fixed deposit interest, then she has to file tax return to claim refund of tax deducted at source.During FY2017-18, your mother’s income would comprise fixed deposit interest and rental income from the let out house property (LOP).
The taxable rental income from LOP is determined by factoring the specified deductions such as municipal taxes and standard deduction of 30% of the net rental value (i.e., gross rent minus municipal taxes). In absence of details, we have assumed that no municipal taxes would be paid on LOP during FY2017-18. Accordingly, income from LOP would be about Rs1.68 lakh.
From the annual rent of Rs2.4 lakh, subtract Rs72,000 (30% of Rs2.4 lakh). As your mother’s gross total income during the FY2017-18 is likely to be about Rs2.28 lakh only (Rs60,000 + Rs1.68 lakh), it is not mandatory for her to file a tax return.
Please note that as your mother’s tax liability is nil, she may submit Form 15H to her bank, giving a declaration that the tax on her estimated total income would be nil; or the income would be below the amount not chargeable to tax. In such a case, tax would not be deducted at source by the bank on the fixed deposit interest.
My parents gifted me Rs75,000 on my birthday last month. I plan to put it to good use and invest this money. What will be the tax implications if I do so? The money was credited to my account from my father’s account. Will both of us be taxed?
We have assumed that you are a major (i.e., older than 18 years ). Any sum of money, the aggregate value of which exceeds Rs50,000 received during the financial year (FY) without consideration, is taxed under the head ‘Income from Other Sources’ in the hands of the recipient. However, an exemption is available if the cash is received from a relative, which includes, among others, parents of the individual (section 56). Accordingly, there should not be any tax implication in your or your parent’s hands. However, any subsequent income from investment of the money shall be taxable in your hands, depending on the nature of the income. With respect to the above transaction, it would be advisable to have documentation in place to substantiate the genuineness of the gift transaction. Please note that if you are a minor (i.e., below the age of 18 years), then clubbing provisions will be applicable. Accordingly, subsequent income, if any, from investment of money would be included and taxed in the hands of either of the parent, whose total income during the relevant financial year is higher.
I have earned savings bank interest. Is all of it taxable?
The interest earned on a savings bank account—maintained with a specified bank, cooperative society or post office—is taxable in the hands of the individual as ‘Income from Other Sources’. One can claim deduction in this respect, from the total income subject to maximum cap of Rs10,000 per financial year (section 80TTA). The balance savings bank interest shall be taxable as per the applicable income tax slab rate.
Parizad Sirwalla is partner (tax), KPMG
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