Birthday Rule for Senior Citizens and Very Senior Citizens under Income Tax Act.

Birthday Rule for Senior Citizens and Very Senior Citizens under Income Tax Act

Income upto Rs. 3,00,000/- is exempted under Income Tax Act for Resident Senior Citizens.

Similarly, Income upto Rs. 5,00,000/- is not taxable for Resident Very (Super) Senior Citizen.

Individual,who is of the age of 60 years or more, but less than 80 years at any time during the previous year/financial year is Senior Citizen.

In the same line, Individual, who is of the age of 80 years or more, at any time during the previous year/financial year is very/super Senior Citizen.

For example:

Suppose today is January 01, 2020), the previous year/ financial year is 2019-20 (assessment year will be 2020-21)[assessment year is always following the previous year].  If an individual's 60th birthday falls in any time during financial year 2019-20, his income upto Rs. 3,00,000/- is exempted from Income Tax.

Similarly, If any individual has celebrated his 80th birthday, any time during the previous year 2019-20, the income tax rate is relaxed rate (upto Rs. 5,00,000/-).

If 60th or 80th birthday falls on 1 April. what will happen?

because, from 1st April, one previous years/financial year ended and next previous year/financial year starts.  

For example:

In previous year/financial year 2019-20 (from 1st April 2019 to 31st March 2020).

Mr. A's birthday was in 2nd April 2019 - He is Senior Citizen for Income of previous year/financial year 2019-20.

(Rule - Individual,who is of the age of 60 years or more, but less than 80 years at any time during the previous year/financial year is Senior Citizen)

But, if Mr. A's birthday falls on 1st April 2020 - Should Mr. A is eligible for Senior Citizen's benefits in previous year 2019-20? (whereas previous year 2019-20 has ended on 31st March 2020 - and not on 1st April 2020)  

Income Tax Act provided clarification regarding attaining the age of 60/80 year, for individuals, whose birthday fall on 1st April every year.

A person born on 1st April would be considered to have attained a particular age on 31st March, the day previous the anniversary of his birthday. 

Hence, in the above case, Mr. A would be eligible for getting the benefits of Senior Citizen in the previous year 2019-20 itself.

Therefore, a resident individual whose 60th/80th birthday fall on 1st April 2020, would be treated as having attained the age of 60/80 years in the previous year 2019-20, and would be eligible for higher basic exemption limit of Income Tax of Rs. 3,00,000/- and Rs. 5,00,000/- respectively, in computing the tax liability for previous year/financial year 2019-20 (assessment year 2020-21).

@FinanceSikho

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Taxation of Gift

Taxation of Gift 

Gift and Income Tax in India

As a general rule, Gift exceeding Rs. 50,000/-  is taxable under - Income from other sources.

Now, what Income Tax Act says about the Gifts:-

- If you are an Individual OR Hindu Undivided Family (HUF);

- You have received any Gift (as explained below), during the previous year;
- Without any consideration;

- and if the aggregate value of such gift is more than Rs. 50,000/- (in previous year);

- The whole sum of money is chargeable to Tax.
(applicable on and after 01.10.2009)  

What can be the type of Gifts?

1. Money(may be in the form of cash, cheque, draft etc.)

2. Immovable properties (land, building or both)

3. Prescribed movable property viz. shares/securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art and bullion.

So, not other movable property, for example TV, AC, fridge are not coming under this provisions.

Aggregate or Individual Gifts

If one gift is not more than Rs.50,000/-  but if the aggregate value of all sums received during the one financial year exceed Rs. 50,000/- then the whole sum will be taxable. 

For example:If gift received in the form of cash of Rs. 49,000/- then it will not be taxable.

But If gift received in the form of cash is Rs. 51,000/- then the whole sum of money (Rs. 51,000/- will be taxable under Income from Other Sources).

What are the exception to this rule?

(Such exception is applicable to all type of Gifts prescribed above)

In the following cases, gifts received in excess of Rs. 50,000/- is not taxable:

-If received from any relative to an Individual and from any member of HUF to HUF,
(Who are 'relative')

  (i) spouse of the individual;

 (ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) brother or sister of either of the parents of the individual;

 (v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual;

 (vii) spouse of the person referred to in clauses (ii) to (vi); 
Gift received from Friend is Taxable. 

- On the occasion of ONLY marriage of the Individual,
 It means gifts received on the occasion of Birthday, Anniversary, other functions are Taxable.

- Under a will/ by way of inheritance,

- in contemplation of death of the payer or donor 

 [gift of property made by its owner who expects to die shortly, the gift being motivated solely by the thought of his or her demise.]

- from a local authority, any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution.(Section 10 of Income Tax Act specifies such institutions,fund etc.)

- from an Individual by a trust created or established solely for the benefit of relative of the Individual.  (applicable if the property is received on or after 01 April, 2017).

In respect of immovable properties (being land, building or both)

If an Individual or HUF receives	any person receives
on or after 01.10.2009 but before 01.04.2017	After 01.04.2017
in any previous year
from any person or persons
any immovable property(being land or building or both)
without consideration, the stamp duty value of which exceeds Rs. 50,000 then the stamp duty value shall be chargeable to tax.
for a consideration, if stamp duty value exceeds the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax. (applicable from A.Y 2014-15 to A.Y 2018-19).
for a consideration, if stamp duty value exceeds 105% of the amount of consideration and the difference between stamp duty value and consideration is more than Rs. 50,000, then such difference is chargeable to tax. (applicable from A.Y 2019-20)

But, here the limit of Rs. 50,000/- is for transaction wise and NOT THE AGGREGATE VALUE. If 2 properties were received in one financial year and stamp duty value of each property is not exceeding Rs. 50,000/- then nothing will be taxable. (the aggregate value can be more than Rs. 50,000/-).

Examples of movable property received as gift

Suppose, Mr. H received in FY 2019-20 shares of Rs. 25,000/- from his close friend and Jewellery of estimated value of Rs. 55,000/- (fair market value is Rs. 57,000/-), as gifts; Now what is taxable ?

(The fair market value will be taxable)- Rs. 82,000/- will be taxable in the hand of Mr. H in FY 2019-20.

Suppose, Mr. H received in FY 2019-20 drawings after paying a sum of Rs. 49,000/- to his close friend. The fair market value of the drawing is Rs. 52,000/- Now what is taxable ?
Nothing is chargeable to tax, being the difference between fair market value and consideration paid is not more than Rs. 50,000/-

Suppose, Mr. H received in FY 2019-20 furniture after paying a sum of Rs. 49,000/- to his close friend. The fair market value of the furniture brought is Rs. 1,00,000/- Now what is taxable ?

Noting will be taxable, as furniture is not the prescribed movable asset.


What will be the case if gift/money/movable assets is received by a non-resident?

for answer- Stay tuned....



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What is NIFTY 50 and How it is calculated?

What is NIFTY 50 and How it is calculated?

- National Stock Exchange Fifty (NIFTY 50).

- NIFTY 50 is an equity benchmark index which was introduced by National      Stock Exchange (NSE).

- NIFTY 50 index is 50 well diversified company’s stock that reflect the overall      market condition.  

Now the biggest question-Which stock is eligible for selection into NIFTY 50 index?

Eligibility:

-Minimum  6 months listing history (company comes out with an IPO, and fulfill normal eligibility criteria for the index for 3 month is also eligible).

-Company should allow trading in F&O segment.

-The stock should trade at an average impact cost of 0.50% or less during the last six month for 90% of the observations, for the basket size of Rs. 10 crore.

What is Impact Cost:

In mathematical terms Impact Cost is the percentage mark up observed while buying / selling the desired quantity of a stock with reference to its ideal price (best buy + best sell) / 2.

Example:

Suppose you want to buy 1500 shares and the available bids in the market are as under:

Buy qty	Buy price	Sell qty	Sell price
1000	98	1000	99
2000	97	1500	100
1000	96	1000	101

To buy 1500 shares

Ideal Price = 99+98/2 = 98.50

Actual Buy Price = [(1000*99)+(500*100)]/1500 = 99.33

Impact Cost = (99.33-98.80)/ 98.50 = 0.84%

Sector representation in NIFTY 50

FINANCIAL SERVICES	41.50
ENERGY	13.66
IT	13.17
CONSUMER GOODS	11.60
AUTOMOBILE	5.66
CONSTRUCTION	3.42
METALS	2.95
TELECOM	2.67
PHARMA	2.17
CEMENT & CEMENT PRODUCTS	1.63
FERTILISERS & PESTICIDES	0.59
SERVICES	0.58
MEDIA & ENTERTAINMENT	0.41

Top Stocks with weightage:

Company	Weight (%)
HDFC Bank Ltd.	10.73
Reliance Industries Ltd.	9.23
Housing Development Finance Corporation	8.42
ICICI Bank Ltd.	6.87
Infosys Ltd.	5.75
Kotak Mahindra Bank Ltd.	4.58
Tata Consultancy Services Ltd.	4.42
ITC Ltd.	4.15
Larsen & Toubro Ltd.	3.42
Axis Bank Ltd.	3.28

Portfolio Characteristics:

Methodology	Free Float Market Capitalization wherein the level of index reflects the free float market capitalisation of all stocks in Index.
No. of Constituents	50
Launch Date	April 22, 1996
Base Date	November 03, 1995, which marks the completion of one year of operations of NSE's Capital Market Segment.
Base Value	1000
Calculation Frequency	Real-Time Daily
Index Rebalancing	Semi-Annually, January 31 and July 31 of each year

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All about the New Income Tax Slabs: The Finance Bill, 2020

All about the New Optional Income Tax Slabs: The Finance Bill, 2020

The Finance Bill, 2020

The optional Income Tax Slabs, applicable for an Individual or a Hindu undivided family (HUF) from 1st April 2020;  have been announced in The Finance Bill 2020. 

Apparently, it is good that new Income Tax Rates Slabs are introduced and minimum threshold for Income Tax levy is also increased.

But, the world is not as good as it seems. 

The New Slabs are subject to many ' Notwithstanding' and 'provided that' clauses.

Now, first see the existing structure of Income Tax Slabs. Here we assumed that, as a prudent salaried person, every person is investing Rs. 2,00,000/- and claiming deduction of Rs. 1,50,000/-under section 80C and Rs. 50,000/- under section 80CCD (1B) towards NPS deduction.

 Existing structure of Income Tax Slabs

Gross Total Income (Rs.)	Deduction	Taxable Income	Rate of Tax	Suppose Taxable Income	Calculation	Tax Payable (excl cess)
up to 450000	200000	upto 250000	0	0	-	0
450001-700000	200000	250001-500000	5%	500000	0-250000- NIL , left 500000*5%	12500
700001-1200000	200000	500001-1000000	20%	1000000	12500 as above+500000*20%	112500
1200001 - and above	200000	above 1000000	30%	1100000	112500 as above+100000*30%	142500

From 1st April 2020, under the optional Tax Slabs regime, the revised slabs will be as under:  

Income (Rs.)	Tax Rate	Suppose Taxable Income is	Tax Calculation	Tax Payable
Upto 250000	Nil	-	-	-
250001-500000	5%	Tax rebate of up to Rs 12,500 if net taxable income does not cross Rs 5 lakh. Thereby, making zero tax payable by an individual if his/her taxable income does not exceed Rs 5 lakh.
500001-750000	10%	750000	250000*10%	25000
750001-1000000	15%	1000000	25000 as above+250000*15%	62500
1000001-1250000	20%	1250000	62500 as above+250000*20%	112500
1250001-1500000	25%	1500000	112500+250000*25%	162500
1500001- and above	30%	1600000	162500 as above+100000*30%	192500

But remember, once the option is exercised, you may not be eligible for claiming certain deductions. 

Under this option/new slab structure;  the total income of the Individual or HUF shall be computed -

without any exemption or deduction under the provisions of
clause (5)	Deduction regarding travel concession or assistance (LTC)
clause (13A)	special allowance to meet expenditure actually incurred on payment of rent in respect of residential accommodation. (HRA)
clause (14)	any such special allowance or benefit in the performance of the duties of an office
other than those as may be prescribed for this purpose
clause (17)	daily allowance to members of Parliament etc.
clause (32)	regarding minor child's income inclusion case
of section 10	Income not included in total income.
OR section 10AA	Special provision in respect of newly established undertakings in free trade zone, etc.
section 16	all deductions from Salary income like entertainment allowance, professional tax, standard deduction of Rs. 50,000/-
clause (b) of section 24  (in respect of the property referred to in sub-section (2) of section 23)	deduction for home loan
	Where the property consists of a house or part of a house which— (a) is in the occupation of the owner for the purposes of his own residence; or,  cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him,
clause (iia) of sub-section (1) of section 32	Depreciation on motor car regarding
section 32AD	Investment in new plant or machinery in notified backward areas in certain States
section 33AB	Investment in new plant or machinery in notified backward areas in certain States
section 33ABA	Site Restoration Fund
sub-clause (ii) or sub-clause (iia) or sub-clause (iii), of sub-section (1) or sub-section (2AA), of section 35	Expenditure on scientific research
section 35AD	Deduction in respect of expenditure on specified business
section 35CCC	Rural development allowance
clause (iia) of section 57	any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ; (Family Pension)
under any of the provisions of Chapter VI-A	almost 75 deductions from section section 80A to section 80VV (including section 80C, section 80TTA and section 80CCd(1B) like, LIC, tuition fee, investment in ELSS, NPS, PPF, Medical Insurance, Education Loan, Donations etc.
other than the provisions of sub-section (2) of section 80CCD (can be claimed)	Deduction in respect of contribution to pension scheme of Central Government. Where, in the case of an assessee,the Central Government or any other employer makes any contribution to his account, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government or any other employer as 75[does not exceed ten per cent of his salary in the previous year].
or section 80JJAA (can be claimed)	Deduction in respect of employment of new employees.

Now, one must take care while opting for new slab option. The tax payable under old tax slabs, where deductions are allowable and under new tax slabs, where certain deductions are not allowed should be compared and analysed for tax saving purposes.



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