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Non-salaried senior citizen, tax exemption, income on intere

Rajes (Senior Individual) (29 Points)

28 October 2015

Hi Experts,

I need a suggestion; in regard to CLEVER Tax planning / exemptions. My cousin received 15 laks as bank interest; in last financial year. Now Incomtax dept wants her to file for last 2 years.

She is now 60 years, has one house in Bangalore. TDS was already deducted by banks. Now they are asking to pay about 1.5 lak more... She is not salaried employee.....

Is there anybody can help with reducting this tax burden... Or any tips or hints.....

Many thanks in advance

Raj

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11 Replies

Miss Rinkal (Student) (1304 Points)
Replied 28 October 2015

That is because tds is deducted at flat rate of 10% and not as per slab rates. Whereas income tax of an individual is levied as per slab rates. Also if the gross income exceeds the basic exemption limit (for ay 2015-16 it is 250000, ay 2014-15 it is 200000 and for ay 2013-14 it is 200000) then return is mandatorily required to be filed irrespective whether tax is paid or not.

Slab rates for ay 2015-16

Income Slabs		Tax Rates
i.	Where the taxable income does not exceed Rs. 2,50,000/-.	NIL
ii.	Where the taxable income exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/-.	10% of amount by which the taxable income exceeds Rs. 2,50,000/-. Less ( in case of Resident Individuals only ) : Tax Credit u/s 87A - 10% of taxable income upto a maximum of Rs. 2000/-.
iii.	Where the taxable income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-.	Rs. 25,000/- + 20% of the amount by which the taxable income exceeds Rs. 5,00,000/-.
iv.	Where the taxable income exceeds Rs. 10,00,000/-.	Rs. 125,000/- + 30% of the amount by which the taxable income exceeds Rs. 10,00,000/-.

Surcharge : 10% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)

Education Cess : 3% of the total of Income Tax and Surcharge.

No rebate if income exceeds 500000/-

Slab rates for ay 2014-15

S. No.	Income Range	Tax percentage
1	Up to ` 2,00,000	NIL
2	2,00,001 to 5,00,000	10% of amount by which the total income exceeds Rs. 2,00,000/-. Less ( in case of Resident Individuals only ) : Tax Credit u/s 87A - 10% of taxable income upto a maximum of Rs. 2000/-
3	5,00,001 to 10,00,000	Rs. 30,000/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.
4	Above 10,00,000	Rs. 130,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.
Surcharge : 10% of the Income Tax, where total taxable income is more than Rs. 1 crore. (Marginal Relief in Surcharge, if applicable) Education Cess :** 3% of the total of Income Tax and Surcharge.

Slab rates for Ay 2013-14

Income tax slab (in Rs.)	Tax
0 to 2,00,000	No tax
2,00,001 to 5,00,000	10%
5,00,001 to 10,00,000	20%
Above 10,00,000	30%
Education Cess: 3% of the Income-tax.

She can claim deductions u/c VIA from gross total income.up to ay 2014-15, it was 100000 and for ay 2015-16, it is 150000 for 80c and if any mediclaim is paid then up to 15000 deduction on it can be availed.

Hence the claim made by it dept might be correct. I mean depending after claiming the deductions if made any

kamlesh bissa (self emplyoed) (23 Points)
Replied 29 October 2015

Mr. Rajesh Any how she has to pay balance amount of tax payable to her and has to file income tax reurn. No other option. Pls consult professional for the same. Thanks Regards Bissa

Miss Rinkal (Student) (1304 Points)
Replied 29 October 2015

The tax can be reduced by claiming relevant deductions but cannot be eliminated completely as income earned is substantial

S. Shiroor (Others) (1207 Points)
Replied 29 October 2015

Mr Rajes it is income from all sources that matters to the IT dept. File IT return for AY 2014-15 and AY 15-16. The quicker you file Return Interest on Tax u/s 234A will be reduced. Either go to a CA or down load yourself Form ITR-1 [with one House] Rent from House [if applicable] also needs to be taken.

Udgam Koomar (Tax Technologist) (1949 Points)
Replied 29 October 2015

yes you have to give ta anyways, advance tax planning will help in tax saving. Once the year has passed no tax saving instruments will help.

Miss Rinkal (Student) (1304 Points)
Replied 29 October 2015

@ Kaardaata: Kindly elaborate your explanation. Unable to get your point

(Guest)

Maybe u can gift this amount to wife/husband and let them reinvest this.saves 3 lakhs for every person u split the income.

Miss Rinkal (Student) (1304 Points)
Replied 29 October 2015

@ Ubaid:

The question here is she has already earned that income. And there is a tax demand. How can that amt be shown as a gift.?

Kindly elaborate your suggestion? And wrt what have you given such suggestion.? Also if any amount gifted between spouse, such income would attract clubbing provisions.

You cannot do tax planning after you have earned the said interest income.

(Guest)

i saw your suggestion above. i had nothing more to add to that.

i gave my suggestion for future years.

and i know clubbing provision will apply if he gifts it. it wont apply in the case of reinvestment though

Miss Rinkal (Student) (1304 Points)
Replied 29 October 2015

@ Ubaid:

One kind advise - Please at least mention that the suggestion you provided is relevant for future years and not relevant in the current scenario, as the person is asking the suggestion based on current scenario and might take your suggestion in the present case itself.

Also wrt clubbing provisions,

Only income earned from earned income will not be clubbed. Not the entire amt reinvested.I.e where entire amt is reinvested clubbing provisions still attracts.

Let's consider an example where you invest Rs 10 lakhs in your wife's name and earn an interest of Rs 100,000. This Rs. 100,000 will be clubbed in your income for the computation of income tax; however, when your wife further invests this Rs 100,000 in another FD and earns Rs 10,000 (10% interest on Rs 100,000) as interest on it, this interest will be considered as her own income only and will not be clubbed with your income.

But say if your wife further reinvested 1100,000 in FD @ 10% then prorata income will be clubbed I.e Out of 110,000, 100, 000 will be clubbed in your hands and 10,000 will be taxed as your wife's income.

Clubbing provisions will also not apply when the gifted money is invested in any investment option which is tax exempt, for instance in the above example, let's say rather than a FD you would have invested the same Rs 10 lakh for buying shares of a listed company in your wife's name. You later sold the shares for Rs 12 lakhs after holding it for a period of one year and earned a capital gain of Rs 2 lakh which ultimately is tax free as long term capital gains are tax exempt. Hence this Rs 2 lakh capital gain income in your wife's name will not be clubbed in your hand as either ways it is tax free. The earlier rule will also prevail when this gain of Rs 2 lakh is further invested by your wife in any investment option and the income earned from it will always be clubbed in her name only.

Hope you get what I m trying to explain?