Basic exemption limit for super senior citizens is ₹5,00,000. In other words, ₹5,00,000 of your taxable income is taxed at 0%.
Q. I am a senior citizen having pension and interest income. Recently, I redeemed some mutual funds possessed by me from 2017 onwards. Since I possessed them for more than 3 years, I presume the income generated comes under long-term capital gains. Please clarify my doubts..
1) If the long-term capital gains exceed ₹1 lakh, what will be the amount that will come under LTCG and will add up to my taxable income?
2) If the LTCG is not derived from equity-oriented funds, what is the rule to consider it as income?
3) Among the mutual funds I redeemed, there were 2 funds giving dividends monthly. But I converted them to growth funds after about two-and-a-half years and redeemed them after about 11 months. Under which category would the income from them fall?
A. 1) In case of long term capital gains (LTCG) for equity-oriented funds, LTCG up to ₹1 lakh is not taxable; any amount over and above ₹1 lakh will be taxed at 10% plus cess. For the purpose of total income, LTCG amount minus ₹1 lakh will be considered.
2) In case of debt mutual funds, the holding period is 3 years. Any redemption prior to 3 years is be considered as short-term capital gains and will be taxed as per your slab rates. Redemptions post 3 years is considered long-term capital gains and is taxed at 20% plus cess. However, for debt funds, the assessee is given the benefit of indexation in case of holding period above 3 years and respective long-term capital gains/loss be computed in such manner.
3) Switch between mutual fund schemes are treated as ‘transfer’ as defined in the Income Tax Act, 1961, and the respective capital gain is to be computed at the time of transfer. In your case, you are to compute the capital gains at the time of switch between mutual funds and also at the time of redemption post 11 months of the switch. Holding period of 11 months in any mutual fund scheme will be treated as short-term capital gains. In the case of equity-oriented gains, it will be taxed at 15% plus cess and in the case of others, it will be taxed at your slab rates.
Q. I am a retiree from a Central Public Sector Enterprise and a senior citizen. The company does not have any pension scheme to be offered directly. A portion of contributory PF amount has been annuited to the EPFO, which disburses a monthly pension amount as family pension. Please clarify the following: 1. Is this covered under ‘employer pension’ by terminology, to be eligible for a standard deduction? 2. Does the LIC pension scheme get any eligibility under 57(iia)
3) Does the PM pension scheme offered as LIC Bavishya Bhima Pension Scheme get any eligibility under 57(iia)? Kindly provide clarification on the above.
A. 1) Annuity received from EPF is taxable under the head ‘Income from Salaries’. Thereby you may claim standard deduction also while computing the taxable income.
2) and 3) Pension received from annuity schemes from insurance companies are taxable under the head “Income from Other Sources” and is fully taxable. Standard deduction is not applicable and it cannot be treated as family pension; there will no benefit by way of Section 57(iia).
Q. I have just completed 80 years of age. I have been filing income tax returns for more than 50 years and am also paying a nominal amount towards tax. Kindly help clarify on the points below:-
1) Any concessions for super senior citizens (above 80 years)?
2) I am now getting a pension of ₹32,000 p.m. from the central government. My pension will be enhanced by 20% as I have completed 80 years. I am getting total interest from all sources of nearly ₹3 lakh. I am depositing ₹1.5 lakh per year in the Senior Citizens’ Savings Scheme in the Post Office. I am covered under the CGHS scheme, though I do not make use of it . Please advise me as to how I can reduce or avoid payment of income tax.
3) I had invested nearly ₹4 lakh in shares during the period 1997 to 2005. These are in paper form, filed in a box file. I could not get these shares dematerialiseed, as the brokers told me all these companies do not exist now. I have a demat a/c with Kotak Securities Ltd. and I have invested about ₹5 lakh. Sometimes I buy and sell shares; am not very active. Can I show this full loss of ₹4 lakh over a period of say 3 to 5 years or so and adjust/avoid payment of the nominal tax that I have to pay.
A. 1) Basic exemption limit for super senior citizens is ₹5,00,000. In other words, ₹5,00,000 of your taxable income is taxed at 0%.
2) You have exhausted the deductions under Section 80C and are already covered under CGHS. You may claim deductions towards donations, if any, made by you as per the conditions laid down in Section 80G, you may claim deduction under 80GG if you are in rented premises and satisfy the conditions laid down in the provision.
3) In order to trigger the provisions of the head ‘Capital Gains’, a transfer as defined by the Income Tax Act, 1961 is to be carried out. As you have not transferred any of the securities in the paper form, you cannot claim the loss that you notionally incurred to the Capital Gains that arose in the current assessment year.
(N. Sree Kanth is partner, GSS Associates, Chartered Accountants, Chennai)
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