I received Rs2.5 lakh in cash as gift on my wedding. What will be the tax implications?
Any sum of money exceeding Rs50,000 received by an individual during the relevant financial year (FY), without any or inadequate consideration, is taxed under ‘income from other sources’ in the hands of the recipient.
An exemption is available if the amount is received on the occasion of marriage. Hence, you are not liable to pay tax on cash gifts received on your wedding.
If I sell the jewellery I have inherited from my grandmother, who acquired it in 1990, will I have to pay taxes?
Yes, the gains, if any, arising from sale of your share of the jewellery shall be taxable as ‘capital gains’ in your hands.
For computing the capital gains in case of inherited property, the period of holding is reckoned from the date of purchase of property by the owner who actually acquired it, other than by inheritance or gift.
Since the jewellery had been acquired and held for more than 36 months from the date of acquisition by your grandmother, the resulting gains shall be classified as long-term capital gains (LTCG).
For an inherited property, the cost of acquisition should be the cost at which the previous owner had actually acquired the property, other than by inheritance or gift, as increased by cost of improvement made later. So, the cost at which your grandmother bought the jewellery should be the cost of the inherited jewellery. The aforesaid cost of acquisition and improvement, if any, made subsequent to the purchase should be increased using the applicable Cost Inflation Index (CII) notified by the income tax department.
LTCG should be computed as the difference between net sale proceeds and indexed cost of acquisition and improvements. You can avail an exemption from LTCG tax by reinvesting the net sale proceeds in one new residential property in India, within the specified time and per conditions laid down in section 54F of the Income-tax Act, 1961.
You could also invest the LTCG in the bonds notified under section 54EC. The investment should be made within 6 months from the sale date, subject to a threshold of Rs50 lakh.
I have completed around 6 years of service and plan to join a new company. I would like to withdraw my Provident Fund (PF) amount. What are the tax implications?
The withdrawal of PF will be as per provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, which requires you to have a non-employment period of 2 months after leaving your job.
The withdrawal of the accumulated balance from a recognised PF is taxable if the employee has not rendered continuous services for 5 years or more to the employer. While computing continuous services of 5 years, the period of previous employment is also included, if the accumulated balance maintained with the old employer is transferred to the PF account of the new employer.
Assuming this was your first job, there is no transfer of accumulated PF balance from previous employer. As the total years of service is more than 5 years, there will not be any tax implication on withdrawal of the accumulated PF balance. But you would need to disclose the PF withdrawal in your income tax return to be compliant from a reporting perspective.
I have earned savings bank account interest. Is it entirely 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 tax deduction with respect to savings bank interest earned from total income subject to maximum cap of Rs10,000 per FY under section 80TTA. The balance interest shall be taxable as per the applicable income tax slab rate.
Parizad Sirwalla is partner (tax), KPMG.
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