How to file Income Tax

Hi Friends, a fantastic newspaper weekly – The Economic Times WEALTH shares with its readers the queries of people from all walks of life related with various aspects of taxation. These queries are answered by well known experts of taxation fields hailing from even greater financial consulting companies.  I felt a need to share those queries online since not many people are aware of that fantastic newspaper from the Times of India Group.

Economics Times – Wealth Sept 28 – Oct 4 2015

Q1. My father-in-law, who passed away recently, had given me Rs. 6 Lakh as gift. Will this amount attract income tax? Will I need any documentation to prove that the amount was a gift from him?

Ans1. Any sum of money property received from a relative, or on the occasion of marriage, or under a will, or by way of inheritance, is not taxable in the hands of the recipient. The term ‘relative’ has been defined under section 56 of the Income Tax Act. Since father-in-law is covered under this definition, the afore-mentioned sum of Rs. 6 Lakh will not be taxable in your hands. You should preserve the related documentation – gift deed, will or any other document – to prove that you received this amount from your father –in-law as a gift. This will be helpful if your tax return is selected for scrutiny and you will be able to substantiate your response with evidence to questions raised by the tax authorities during the audit.

Query answered by Expert – KULDIP KUMAR, Partner and Leader, Personal Tax, PWC INDIA


Q2. I have been investing in HDFC Prudence Fund via a SIP for the past 1.5 Years. Given the current market turmoil, should I discontinue the SIP?

Ans 2. Please continue with your SIP as it helps average the rupee cost over market ups and downs, and make the best of market volatility. Also, since you are invested in a balanced fund, the debt component in the fund will provide you with the much needed hedge in a down market.

Query answered by Expert – C.R. Chandrasekar, CEO and CO-Founder, FUNDSINDIA.COM


Q3. My 58-year-old mother, 30-year-old wife, and two-year-old daughter are dependent on me. I am 30 and often have to take my mother for health check-ups. While opting for a family floater health plan, should I pick one with OPD benefits (which is expensive) or one without it?

Ans 3. You can opt for a family floater policy to cover your wife and child. However, you need to buy a separate policy for your mother. You can also buy a tax-saver policy that provides OPD Benefits along with standard indemnity coverage. This will be easy on your pocket and give you tax benefits as well. You could also consider policies that offer protection, with no medical checks till the age of 65. In case you wish to have a full cover along with OPD, you will have to pay a higher premium.

Query answered by Expert – Bhaskar J. Sarma, MD and CEO, SBI GENERAL INSURANCE


Q4. I want to build a corpus of Rs. 1 Crore for my newborn son’s higher education. How much do I need to invest every month in mutual funds to achieve this? What is the process of investing directly in mutual funds?

Ans 4. Assuming you need Rs. 1 Crore when your son turns 18, you will have to invest Rs. 13,000 every month to be able to generate a 12% annual return. To reach your goal, you should invest in well-managed diversified equity funds with proven track records. Even though equity funds carry high risk, they are suitable for long-term goals. Systematic Investment Plan (SIP) is the best way of investing in equity funds over the long term.  To invest in mutual funds, you first need to complete the KYC (Know Your Client) process.  The form can be downloaded from the AMFI (Association of Mutual Funds of India) Website. The form, along with your proof of identity and proof of address, is to be sent with the common application form and submitted at the investor service centre of the fund house. Once the registration formalities are done,  you can start investing.

Query answered by Expert – Nirmal Rewaria, Business Head, EDELWEISS FINANCIAL PLANNING


Q5. I do not want to invest the capital gains from the sale of my property in another property. Are there any other investment options that can help me save tax on long-term capital gains?

Ans5. You can avail of exemption by investing in specified bonds of the National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC) within six months of the sale of property. The maximum investment in bonds cannot exceed Rs. 50 Lakh. If the investment exceeds the amount of capital gain, the entire capital gain will be exempt, otherwise the exemption will be in accordance with the capital gain invested.

Query answered by Expert – Homi Mistry, Partner, DELOITTE HASKINS & SELLS

Q6. I recently surrendered two unit-linked policies. I had stopped paying the premium after three years for both the policies. I redeemed the two plans five years after I paid my last premium. What will be the tax implication on the gains that I made?

Ans6. To avail of tax benefits under section 80C, you need to remain invested in a unit-linked insurance policy for a minimum period of five years. Otherwise, the deduction availed of under section 80C shall be deemed as income of the assessee in the year in which he surrenders the policy. Further, if the amount payable by the insurer exceeds Rs. 1 Lakh, 2% tax will be deducted at source (TDS) under section 194DA. The exemption provided for insurance policies under section 10 (10D) shall not apply in your case since you have not paid the premiums regularly for a period of five years.

Query answered by Expert – Divakar Vijayasarathy, Co-Founder, MEETURPRO.COM


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