10 important income tax queries (India) answered

It is income tax filing season and everyone must be having queries or questions on income tax returns and income tax filing.

Here are some income tax queries in India answered. This is only in the Indian context and should not be used as income tax queries for other countries.

Let us know if you have any other clarifications and we will be happy to answer them for you.

Query 1

Can money paid to your employer for serving notice period be excluded for calculating one’s net taxable income ?

Answer : No, while calculating the net taxable income, the employee cannot get rebate for notice period payment served with the employer. Whatever money has been paid to the employer is actually taxable.

Query 2

Suppose you have two DEMAT accounts. One has your wife’s name on it along with yours, so essentially it is joint. The other has only your name on it. If you were to transfer shares from the first to the second, will you attract any capital gain tax?

Answer : You will not attract any capital gains tax if no money has been paid for the transfer, i.e., the transfer will be considered as a gift from your spouse, which is tax-free. It will be taxable for the individual who purchased the shares that are now being transferred.

Query 3

You have two houses. One is rented out while the other is self-occupied. The self occupied one has a home loan on it which fetches a tax deduction of Rs 1,50,000 on the interest paid. Will you get a higher tax benefit if you were to rent out this house too?

Answer : Yes, in case of a rented house, one can claim the total interest accrued for the year as a deduction and there is no upper limit. Rs 1,50,000 is the limit for a self-occupied property only. Note we are taking about interest portion of the loan only and not principal here.

Income-Tax-Queries

Question 4

You are  irregular in filing your income tax returns though your income tax returns has been deducted at source for all years. What can happen ?

Answer : The I-T department can ask for records of the previous six years preceding the relevant financial year. Not filing returns can attract a penalty of up to Rs 5000. If there is any undeclared income, then the penalty varies between 100% to 300%.

Question 5

You are salaried and TDS has been deducted from your salary. But you did not get your Form 16. So you do not know whether tax has been deducted and paid to the IT department or not. What do you do ?

Answer : You can view your tax credit on form 26AS on the I-T department’s website. If the tax has been deducted and not deposited, then first  write to your employer to correct this. In case no action is taken by your employer, write to the I-T department.

Question 6

You have bought several equity diversified mutual funds through SIPs over the last few years. If you sell these, how can you classify the capital gains (short term or long term) for tax purposes?

Answer : All SIP investments are treated separately for tax purposes. If you sell now and the profits from equity investments are more than a year old, then they are treated as long-term capital gains and are exempt from tax. However, if the gains from SIPs are made in the past 11 months, these will be taxed at 15%.

Question 7

You did not file your tax by 31 July.  Can you file a delayed return to get a refund, if applicable ?

Answer : You can file delayed returns for up to two years from the end of the financial year. If all the taxes have been paid or deducted then you will not have to pay a penalty but you will not be eligible for a refund.

So essentially, you can claim a refund only if you have filed your return by the due date, that is, 31 July.

Question 8

You are a NRI and have a bank account in the country abroad. Is the interest earned by the deposits in this account taxable in India?

Answer : The interest earned by your deposits in the abroad bank account will be taxable in India only if it has been received in India. If the interest has been credited to your abroad bank account, the interest will not be taxed in India, it will instead be taxed in the country abroad.

Question 9

If you gift your wife some money and she invests it in shares, will the capital gain be treated as hers or mine?

Answer : If you gift money to your wife and she invests it, the capital gain from the investment will be clubbed with your income and you will have to pay tax on it.

Question 10

You want to gift your wife some shares. Will either of you have to pay income tax? If your wife sells these shares, how will the profit be taxed?

Answer : You will not have to pay tax when you transfer/gift shares to your wife. The shares can be transferred from your demat account to your wife’s demat account. You should prepare a gift deed listing the shares and their present value. If your wife sells these shares and earns capital gains, the profit will be treated as your income.

Comments

  1. Nitin Johri says:

    I have changed my job and due to which i have to relocate from one city to another. There is a certain amount that the company paid to me as relocation allowance; will this amount be treated as a taxable income to me (though i have expensed major portion of this amount in relocation and have the original bills as well).

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