Gopal Dass Nangia: I am a senior citizen of 94 years plus age. I am a regular reader of your excellent advice column on Income Tax. I have two small queries mentioned below regarding income tax. My gross total income before allowing deduction under chapter VI-A (i.e. if the gross total income referred to in item 3 of new Tax Return form 1) is less than Rs 1,85,000 during the financial year 2006-07. Kindly let me know whether I should furnish the return for my income. Also, advise what is the relief under section 89, 90, 91 and how much deduction is allowed on SB accounts in banks, interest on bonds and dividend on MFs etc.
(a) Since your gross total income is less than Rs 1,85,000, you need not file your return of income. However, you need to maintain proper records for each year so that in case the I-T Department sends notice for non-filing of return for a particular year, you should be in a position to disclose proper facts. Also, if any tax is deducted at source, than to claim refund, you will have to file return of income.
(b) Section 89 of the Income-Tax Act refers to grant of relief in respect of income tax on account of assessment of total income at a higher rate due to receipt of salary in arrears or in advance, family pension in arrears. The assessee has to make an application to the assessing officer in Form No. 10E.
(c) Section 90 refers to the double taxation relief. The Central Government enters into a double taxation avoidance agreement with the government of foreign country with the main purpose of avoidance of double taxation of income in India and in other foreign country.
(d) Section 91 refers to grant of deduction (credit) on account of income tax paid in other country with which no double taxation avoidance agreement exists.
(e) The deduction in respect of interest on savings bank account, interest on NSC, interest on security of the Central Government or State Government was allowable under section 80L of the Income-tax Act, till assessment year 2005-06. With effect from assessment year 2006-07, deduction is not available in respect of such income. The dividend (income) on mutual funds is exempt from income tax under section 10(35).
K.Venkataraman: My daughter, a software consultant, bought shares allotted to employees by the company she was working about 14 years back. Since then she has left that company and is working in the USA and is a resident there for the past ten years. After the company declared bonus shares a couple times the market value of the shares has increased considerably. Yearly dividend is being credited into her savings account, which she had before leaving India. Now she contemplates becoming a citizen of that country. What are the tax and other implications and what steps she should take?
(a) Presently, dividend income is exempt from income tax under section 10(34). In respect of long-term capital assets in the nature of shares, the profit on sale of shares will be exempt from income tax under section 10(38) provided securities transaction tax is paid. In respect of sale of shares held for less than 12 months in respect of which securities transaction tax is paid, the profit arising there from will be taxable at 10 per cent plus surcharge and education cess, wherever applicable.
(b) You will have to look into the tax laws of the US in relation to taxability of income earned in India.