Gratuity up to `10 lakh will not be taxed
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I have been working in UK since 2005 and have been paying tax in UK and filing returns here. My wife is a housewife and does not have any income. I would like to raise the following queries as regards income-tax in India for both of us:
The only Indian income that I have is interest on savings and fixed deposit with ICICI and Bank of India, dividends on shares held and very infrequent capital gains but the shares are always sold after holding for at least one year. This is all basically the Indian savings in the past, I did not invest after transferring money from London. The total of such income would fall below the taxable levels in India. Based on a rough estimate the total income in India will amount to approximately `50,000 per annum. The same applies to my wife but her income would be even lower. The queries are whether we are obliged to submit returns in India; we both have PAN numbers but have not filed any returns since 2005.
The Bank accounts that we have are resident accounts, do we have to convert them to NRI accounts. How will NRE fixed deposits be treated presuming that we wish to use the proceeds for investment either in stocks or real estate in India or else continue with the deposits.
Via e-mail
Amil Sen.
It is not mandatory for you to file your income-tax returns if your total income is below the threshold limit specified under the income -tax law, irrespective of the fact that you hold a PAN. The bank account which you are maintaining cannot be converted into a NRI account. Instead, a new NRE account needs to be opened. The amount in the NRE fixed deposits account needs to be transferred to a NRE account. Investment in shares, real estate, etc in India can be made through this account.
I retired from LIC of India on January 31, 2010. An amount of `4,88,520 was paid to me as gratuity and Income-Tax was deducted on a portion of gratuity of `1, 38,520 (in excess of `3.5 lakhs) computing as income from salary and other emoluments. Now wage revision in LIC has come retrospectively and some more amount will be payable as difference of gratuity. As the new gratuity Act come into force with effect from May 24, 2010 (gratuity upto 10 lakh not taxable) retirees after May 24, 2010 need not pay any Income-Tax on difference of gratuity. Whether the difference of gratuity now payable to me will be taxable along with the pension income for the current Financial Year.
R.V.N.Murthy
Via e-mail
The Central Board for Direct Taxes’ notification for enhancement of exemption limit upto `10 lakhs towards gratuity amount received is applicable to employees who retire, or become incapacitated before retirement, or expire, or whose services are terminated, on or after May 24, 2010. Therefore, you will not be eligible to claim any exemption on the arrears received on account of gratuity and the same shall become taxable.
Kamal Rathi is a chartered accountant,
representing Rathi & Malani, a Hyderabadbased
accounting firm. Readers can mail their queries on income tax to kamalrathi.ca@gmail.com
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