TAX TALK-02.01.2017-THE HITAVADA
CA. NARESH JAKHOTIA
Senior citizens are exempt from payment of advance tax
I am a Senior Citizen, Tax Payer, having income from Central Civil Pension and Bank Interest (Savings and Fixed Deposits). To obviate delay, several visits to Bank and other hassles in obtaining Form 16(1)-TDS Certificate, I propose to pay full amount of TDS due by paying in one installment at the beginning of Financial year as Advance Tax by Challan and then file form 15H at the Banks, as TDS also is treated as Advance Tax. I can quote Challan No. in I.T. Return instead of TDS No., while e-filing ITR. Kindly advice if it is permissible? [S.V.Mohanan Unnithan, Sr. Citizen, Amravatifirstname.lastname@example.org]
In your case, it appears that you would not be satisfying the pre-condition for submission of Form No. 15H. Though you would be duly discharging your tax liability by making tax payment well in advance, still declaration in Form No. 15G by you would be considered as false declaration & could be subject to penal consequences. The reasons pointed by you may be genuine but submission of form No. 15G would not be proper.
- Forms 15G and 15H are the declaration forms to seek exemption from Tax Deduction at Source (TDS) on interest payment. Form No. 15H is for senior citizens whereas Form No. 15G is for non senior citizens. 15G cannot be given to any person if interest payment on securities/ interest (other than “interest on securities”) exceeds the applicable basic exemption limit. However, this is not so with Form No. 15H. Senior citizens can submit form No. 15H even if interest payment by the payer exceeds basic exemption limit, provided that his tax liability on the basis of his estimated income is nil. Effectively even if the interest from any one payer exceeds basic exemption limit (i.e., Rs. 3 Lacs & Rs. 5 Lacs for senior citizens and very senior citizens respectively), Form No. 15H can be submitted by senior citizens if the ultimate tax liability is nil as a result of deduction u/s 80C etc.
- One needs to carefully note the pre-condition for submission of Form No. 15G/15H. Both the forms are very frequently used declaration form which is routinely submitted to avoid the TDS in respect of interest payment. However, taxpayers should be extra careful before singing the declaration form as wrong declaration could make them liable for prosecution under section 277 of the Income Tax Act-1961.
[Note: (i). Now a days, all the TDS by the banks & other payers gets duly reflected in Form No. 26AS of the payee. So, even if the TDS certificate is not collected by the payee, the TDS credit would still be available to the payee.
(ii). Senior citizens carry special privilege in the form of exemption from payment of advance tax if they don’t have any income chargeable under the head “Profits and gains of business or profession”. In short, senior citizens without any business income are not required to pay any advance tax. But, they are not eligible to make the declaration in Form No. 15G if their income (even after chapter VI A deduction) involves self assessment tax payment.]
1. Dividends received from M/F units/shares are exempt from income
tax but maturity amounts received after 3/5 years on redemption, which
amount is to be shown as exempt income full amount or only the
profit amount in that year of redemption?
2. From own savings, an amount have been given to both wife and
major son who is a student and they subsequently kept the amount in
joints savings bank / FDR account where my name is kept as second
holder in E/S mode of operation, in this case, interest received or
accrued will be counted in whose income, as they both are non filers
due to income is below taxable limit.
3. Senior citizen having income from pension/bank interest on FDR &
savings account and also sometimes deals in intraday/delivery based
share trading, in such a case which ITR form is to be used and whether
any advance tax is payable?
1. Any profit arising on Redemption/sale of equity oriented mutual funds/shares which are held for a period of more than 12 months is considered as Long Term Capital Gain (LTCG) & if such transaction is covered by payment of securities transactions tax (STT), it would be totally exempt from tax u/s 10(38) of the Income Tax Act-1961. In such case, it is advisable to mention the receipt of entire amount as exempt (& not merely the amount of profit on redemption). [However, if the redemption/sale is done within a period of 12 months then the profit would be treated as Short Term Capital Gain (STCG) & if the transaction of sale is covered by payment of securities transactions tax (STT), it would be taxable at a concessional rate of 15% u/s 111A].
- Gift or Transfer of funds to the family members or investment in their name could be a genuine emotional expression. At the same time, it could be a powerful tool to reduce the overall tax impact as well. However, before using the gift as a tool of tax planning, one must understand the clubbing provision.
Understanding clubbing provision:
Normally, a person is taxed in respect of income earned by him. However, in certain special cases, income of other person needs to be included (i.e. clubbed) in the taxable income of the taxpayer and in such a cases, he will be liable to pay tax in respect of his own individual income as well as income of that other person. The situation in which income of other person is required to be included in the income of the taxpayer is referred to as “Clubbing of Income”. The idea behind clubbing is to ensure that there is no avoidance of tax by an individual who has a lot of assets and hence is looking to spread to investment in different names.
Income from assets transferred to spouse:
By virtue of specific clubbing provision, where an asset is transferred by an individual to his spouse directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, any income from such asset is deemed to be the income of the transferor. Like in your case, you have gifted the amount to your wife which she has invested in bank FDR /saving bank etc. Income by way of Interest etc from such investment/FDR would not be treated as her individual income but would be clubbed with your income for taxation purpose.
Income from assets transferred to Major son:
Clubbing provision is not applicable in respect of gift done to major son/daughter. Since your son is major, interest earned by him out of the gifted amount would be treated as his individual income and would not be subjected to clubbing provision in your hands.
3. Income from intra-day trading of shares is normally considered as speculative income and is taxable under the head “Income from Business & Profession”. Individual with intra-day profit/loss would be required to file the return of income in ITR-4 or 4S. In such case, since the senior citizens will be having income under the head “Income from business & profession”, there would be no exemption from advance tax provision. The liability to pay advance tax is there if the senior citizens have income under the head “Income from Business/Profession”.
[Readers may note that the scheme of presumptive taxation (u/s 44AD) applies to intra-day share trading activity also].
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
or email it at email@example.com].