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TAX GURU: ‘Can this help save capital gain tax?’

Anil Rego, CEO, Right Horizons (external link), answers your personal income tax queries.

Dinesh Nayak: Dear Sir, The net maturity proceeds of single premium life insurance policies are now taxable.

The question is whether survival benefits paid at intervals during the tenure of the policy are to be included in the “Net Maturity Proceeds” for the purpose of calculating income from a single premium life insurance policy.

I bought an insurance policy with single premium of Rs.97048 and tenure of 9 years. The sum assured was Rs. 130000 Gross maturity proceeds were Rs. 111348 There were two survival benefits of Rs. 19500 each at 3 year intervals.

In my layman’s understanding, my income from this policy is Rs 111348 minus single premium of Rs. 97048 i. e. 14300.

But LIC is deducting TDS by adding the two survival benefits to this i. e. Rs. 14300 plus 19500 plus 19500 amounting to Rs. 53300.

My question is, should I report Rs. 14300 or Rs. 53300 as my income from this policy while filling my ITR. AIS shows Rs. 53300.

Anil Rego: You need to consider the total payments (Rs 53,300) including the survival benefits as this is also income to you. Hence, what the insurance company has deducted is correct and is in line with the AIS as well.

NAMRATA ANKOLEKAR: My wife is going to sell our 3BHK Apartment in Mapusa, Goa and around Rs32L will accrue as capital gain. We wish to invest the indexed price amount in the pension scheme whilst the capital gain will be distributed among two daughters Akhila and Amrita. I have asked Amrita to use her share in repayment / part payment of the housing loan and the share of Akhila will be used for purchasing a flat/ residential property. 

Will the above plan help in saving capital gain tax?

What if they deposit their share / go for investment in mutual funds?

What is going to be the liability of the heirs in case the parents distribute the capital gain amount?

In my opinion if a senior citizen sells his only residential property the capital gain tax should not be applied. In my case when I distribute the CG amount to my daughters and they use it to either pay back their housing loan or purchase a new residential property the benefit as per the relevant income tax act should be applied and the benefits should be given to the wards. 

Anil Rego: The capital gains tax is applicable to the individual on whose name the house stands at the time of selling. Since the property is in your spouse’s name, capital gain tax will be payable by your spouse. Any tax planning like investment in Capital Gains Bonds or in another property would need to be in your spouse’s name only.

There is no exemption for senior citizens or for single house.

To save tax on sale of the property, the capital gain must be invested in your spouse’s name either in 54 EC Bonds (max limit of 50 lakh) or in a new house, within the required periods. Otherwise, your spouse will have to pay the relevant tax, post which she can make gifts to relatives without tax incidence on the gift (relative as defined in the IT Act).

Renu Sterling: Just before my marriage in 2010 I had deposited my savings in a fixed deposit account in a nationalized bank account.

Now after 12 years when we were given the money back, out of a total of around 2,20,000 which was receivable, I got only 1,90,000 odd. That means the bank deducted almost 30,000 as deductions for INCOME TAX.

At no point of time did they tell us that there were supposed to be any filing or I should report the interest on an annual level. We were under the impression that it was a normal supposedly TDS deduction which could be claimed at the end of the financial year but we were wrong.

Now a few accountants we approached told us that the money is lost forever because we did not claim it in a time bound manner. How could we even know the bank was up to all this and how would we know that filing was to be done.

I am a housewife and my husband’s job has not picked up anything so we are literally living on borrowed funds. This money was much needed. PLEASE HELP.

Anil Rego: Banks deduct tax at source at the time of crediting interest to your account if the amount of interest is beyond Rs.40,000 for individuals and 50,000 for senior citizens. TDS is deducted by bank at 10%. You had an opportunity to submit Form 15G or 15H to claim interest income without TDS by the bank. Now that you have missed this opportunity, you can claim a refund by filing an Income Tax Return, especially if you have no other source of income.

You could file your returns now if it matured in the last financial year. If it matured in the current financial year, you would need to wait for the completion of the financial year before filing your returns and claiming a refund.

Pawan Kumar Gupta: I am a govt servant and i have made some payment in PM relief fund during corona epidemic this year. I have opted new tax regime. As all other rebate under section 80 c becomes zero under this, I want to know is the amount rebate table under section 80 G in new tax regime also. If yes how I can show it, as all columns in rebate side became zero as soon as I opted it.

Anil Rego: This section 80G comes under Chapter VI A. Chapter VI A Deduction is not available under the new tax regime. And hence you won’t be able to claim this deduction under the new tax regime.

Do you have any personal income tax query? Please mail us at [email protected] with the subject line ‘Ask Anil’ and Anil Rego will answer all your tax queries.

Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.

You can find more of Mr Rego’s answers here.

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