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Balwant Jain

Tax and Investment Expert ,

How to save tax through NPS

 

Questions Answered

Q

guest: My NRI son wants to gift Rs 5Lakh to my wife by cheque from his NRO Account. Please let me know if the income derived from this gift will be treated as income of my wife or my son. I also want to know as to how this amount should be shown in the IT Returns of my wife.

Balwant Jain: There are two aspects to this transaction. First implication is about taxation of the gift money in the hands of your wife and second is about clubbing of the income arising to the asset so gifted. As per section 56(2) (x) of the income tax act the gifts received by a person in a year is treated as income and fully taxed in case, the aggregate of such gift received from all the sources exceed fifty thousands. However gifts received from certain specified relatives are fully tax free in the hands of the recipient and since the gift tax was abolished long back, there is not tax liability in the hands of the donor as well. As far as second implication of income arising to such income is concerned, there is no provision for clubbing of income arising in respect of gifts received from son. So the transaction of gift by your son to your wife does not have any tax implication now nor are there any clubbing implications.
Q

guest: i have a daughter aged 2 months, i was thinking to start investing 50000 annually into NPS scheme, which can help in her marriage. suggest how this scheme is ?

Balwant Jain: You can not open an NPS account unless the subscriber has completed 18 years. Even if the daughter is over 18, and In case you invest money in the name of your daughter in NPS you will not get any tax benefit. It is only if you contribute towards your own NPS account that you get an additional tax benefit of Rs. 50,000/-. every year under Section 80 CCD(1)(B). Moreover since you wish to use this money for her marriage, I doubt whether you will be able to withdraw the full money for her marriage from NPS even if you contribute to you account. In stead I would advise you to open a PPF account in her name and contribute this amount in her account for which you will get the benefit of deduction under Section 80C. Alternatively you can invest in ELSS in your name where the probability of getting higher returns in high with higher risk. So take the decision after evaluating your risk profile and ability to take risk.
Q

guest: currently want to invest 40 lakhs. Please suggest.

Balwant Jain: Where and how to invest though seemingly a simple question needs elaborate discussion about your age, purpose, risk appetite etc of the investor before the seemingly simple question can be answered. Please post an elaborate question so that a proper and relevant answer can be given.
Q

archukulkarni19: Is deduction claims under various sections for filing IT returns has been extended till 31 July, 2020 (FY 2910-2020)?

Balwant Jain: Yes. The CBDT has issued a communication on 24th June re-extending the date upto which one can make investments for various tax benefits available in respect of the financial year 19-20 which is over. Earlier this date was extended till 30th June, 2020.
Q

guest: Is it a good idea to switch amounts from FDs and invest in Debt MFs from the rate of return and taxation point of view?

Balwant Jain: The debt fund provide better tax efficient evenue in case the investment is made for more than 36 months. As far as returns are concerned it is difficult to guess the interest rate behavior in immediate future. However since debt funds provide better liquidity and efficient returns, you can shift 50% of your investment in FD to debt funds.
Q

guest: Dear sir, I am 45 years old and want to retire at 50. I want a monthly income of Rs 1.50 lakh. Is there a scheme where I can get 8-10 per cent tax-free income if I start investting now either monthly or lump-sum

Balwant Jain: The expectation of 8-10% tax free income is unreasonable where the government saving schemes are offering around 7% return which too is taxable except for PPF where the interest is tax free but you can only contribute only 1.50 lakhs in a year. Reasonably you should have expectation of around 6% return that too not tax free.gone are the days of high returns.
Q

Dristi Jain: I wish to gift my real brothers married daughter some amount by cheque. Will the donor or donee be liable to income tax ? Is there any limit ?

Balwant Jain: As per section 56(2) (x) of the income tax act the gifts received by a person in a year is treated as income and fully taxed in case, the aggregate of such gift received from all the sources exceed fifty thousands. However gifts received from certain specified relatives are fully tax free in the hands of the recipient . Gift given by an uncle to his nephew or niece is tax free in their hand without any limits. Please note reverse is not true. So gifts received from nephew or nieces are taxable in the hands of uncle or aunt.
Balwant Jain: In case you still have any quesry please send the same to jainbalwant@gmail.com
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