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SAIKAT DAS

Category : Return f..,

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December 21, 2018 12:12 pm

Dear Amlan, I want to know about
1. how can i save income tax upto 7lacs /annum??

2.Below 4 lacs income ,Paying income tax or Create a new LIC policy ,which is better and why??

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Amlan Dutta

1.) If someone is earning 7 lakhs per annum ,then the tax liability is around 12500 + 40000 =52500 plus cess ....To save tax , he/she can invest in permissible deduction sections under 80 ...a very popular saving is investing under 80 C in PPF to the tune of 1.5 lakhs ...this alone shall make taxabl...

December 21, 2018

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Amlan Dutta

December 21, 2018

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Sunil Sahoo

Category : Clubbing..,

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December 20, 2018 11:30 pm

How can clubbing be avoided in cases of gift to non working wife/spouse...can you guide further on this

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Amlan Dutta

Section 60 to 64 speak of clubbing of income
There are different ways where you can save on some of the taxes when incomes are clubbed.

a.) Interest on Interest:
In case you earn a lot of money while your Spouse has zero income, you can benefit from investments made in his/her name. The interest earned from the investment will be clubbed with your income and taxed accordingly. However, if your spouse re-invests the income and earns income from this investment, it will be taxed on him/her only as per respective tax brackets.

For instance, you have invested Rs.20 lakhs in equities in your spouse’s name and earn Rs.10 lakhs from that. The income from this investment will be clubbed with yours and taxed accordingly. However, if this Rs.10 lakhs is again invested by your spouse in equities and earns Rs.4 lakhs, the income this time will be taxed on him/her. So, assuming your wife doesn’t earn anything, this Rs.4 lakhs will put her in the 10% tax bracket with mandatory exemption up to Rs.2.5 lakhs. She will ultimately pay Rs.15,000 p.a. as income tax on the amount.

Now, if you had invested the Rs.20 lakhs in your name and reinvested the income of Rs.10 lakhs to make another Rs.4 lakhs, this amount will be taxed as per your tax bracket which is 30%. The amount of tax you pay is Rs.1.2 lakhs p.a. on this amount.

A point to note here is that if your spouse is in the 10% or 20% bracket, tax calculations will become complicated for you and you might not benefit from the investment also if your spouse is transferred to the 30% bracket with you if income from investments push her tax bracket. You should ideally approach this method only if your spouse or major child is not earning anything.

Loans to Spouse:
Another way is to give money as interest-free loans. This is lawful and provides you with tax exemptions on up to an extent on the loaned amount. Giving loans to dependents will benefit you more than giving gifts. A simple letter notifying the loan amount and signed by both parties is enough to save taxes in this case.

In cases where clubbing does happen , if the investment is in a exempt source i.e say investment is in a PF whose interest income is exempt , then clubbing wont effect since the clubbed income is exempt anyways

(Note for major son/daughter, clubbing doesn't happen...it only happens in the case of minor son , so if you are doing anything for a minor son , then ensure to invest in exempt sources in his name else the income shall get clubbed to higher income generating parent)

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December 20, 2018

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Amlan Dutta

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December 20, 2018

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Sunil Sahoo

Category : Clubbing..,

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December 20, 2018 6:13 pm

I want to know two things regarding clubbing of income
1.) If grandfather decides to gift any money to his niece/nephew, will there be any clubbing of income
2.) If father gives money to his son/daughter will there be any clubbing of income

Can you please mention the cases wherein there shall be cl...

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Amlan Dutta

Good question , for these we will refer section 56(2) which defines list of relatives and section 60 to 64, which deals with clubbing of income in certain combinations of gift given to relatives

In your particular cases, both relationship ( niece and parent ) fall in the realm of relative ...not...

December 20, 2018

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Amlan Dutta

December 20, 2018

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Shriya

Category : INCOME S..,

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December 20, 2018 6:00 pm

Hello Sir,

One more question - The base year to calculate inflation index is shifted from 1981 to 2001.
So if any properties that were acquired before 2001 has to be sold now, we have to consider the 'Fair Market Value' in 2001 and calculate the adjusted acquisition price.

My question is - How can we ...

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Amlan Dutta

The same methods which were used to determine the fair value when the base value was 1981 is to be used even now when the base value has shifted to 2001 ......According to the Income-tax Act, 1961, Fair market value shall be the higher of

—cost of acquisition of the property, or
—the price that the property shall ordinarily sell for if sold in the open market. There is no definite rule to calculate FMV of a property. However the one that department shall accept when it is done by a registered valuer It is advisable to get the valuation of the property done from the registered valuer.
Government-approved valuers follow a standard process for the valuation and provide a detailed report. In addition to other parameters “to derive at the FMV of a property, a valuer also considers area and dimensions of the property, is it freehold or leasehold, is there any restrictive covenant in regard to use of such property, insurance of the land and property, if the land falls under any development plan of the government,

A valuer needs to be registered under section 34AB of Wealth Tax Act, 1957, to act as a recognized valuer of income tax department. Each valuer is provided with a license from the department to work as a valuer.. In case and AO raises any doubt over the report it is valuer responsibility to reply, and if needed , the valuer can even visit the AO for clarification on the report

An assessee should keep the valuation report along with other documents related to capital gains, for at least 8 years after the relevant assessment year.

(Just for knowledge - The technique most widely used to estimate FMV is to look at the sale instances of similar properties in the same neighborhood.
One may decide to use circle rates, but then it is not available for all cities
To determine FMV, you can also consider real estate indices for extrapolation , such as the National Housing Bank’s (NHB’s) Residex, and two indices of the Reserve Bank of India (RBI)—Housing Price Index (HPI) and Residential Property Price Index (RPPI).

But again, the utility of these indices is limited. The problem is that most of them are new and do not provide price trends before 2001. )

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December 20, 2018

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Amlan Dutta

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