Recurring Deposit Tax Exemption: I’ve a month-to-month recurring deposit of Rs 20,000. Will I’ve to pay earnings tax yearly?

Recurring Deposit Tax Exemption: I have a monthly recurring deposit of Rs 20,000. Will I have to pay income tax annually?

I’ve been depositing Rs 20,000 per thirty days in RDs since September 2019. The maturity quantity might be Rs 5,16,396 after two years. Accrued curiosity statements are given for the monetary yr. Is earnings tax payable for every monetary yr on accrued curiosity or as soon as on getting the maturity quantity?

Divakar Vijayasarathy, Founder and Managing Associate, DVS Advisors LLP replies: Whether or not the curiosity is to be reported yearly or upon maturity, is determined by the tactic of accounting chosen by the assessee. There’s an choice accessible to supply curiosity earnings for tax on accrual foundation or receipt foundation, on the discretion of the assessee. In case you’re following the accrual foundation of accounting, the curiosity earnings is to be reported on the finish of each monetary yr. In case the money system of accounting is being adopted, your complete curiosity earnings may be reported upon maturity of RD. It’s at all times advisable to report accrued curiosity earnings yearly to keep away from mismatch of TDS. With the accrual system, the general earnings supplied to tax shall be within the decrease slab charges in comparison with money system whereby your complete curiosity earnings may push the entire earnings to increased slab charges.

I’m an NRI. I wish to switch a present of Rs 10 lakh to my son’s checking account. He’s a resident Indian. What would be the tax implications for him? Can he subsequently use the cash to spend money on shares and funds?

Shubham Agrawal Senior Taxation Advisor, Taxfile.in replies: Items to your youngsters are exempt from tax in India. There might be no tax legal responsibility in your son for this quantity. This exemption is clearly specified by part 56(2) of Revenue Tax Act, 1961. It will be supreme to execute a present deed for this transaction. He can make investments the quantity in direction of buy of mutual funds and funding in shares.

I co-own a debt-free residence in Mumbai with my spouse, the place we dwell at the moment. We are actually planning to purchase one other residence in Navi Mumbai as co-owners and might be making use of collectively for a house mortgage. What would be the earnings tax advantages for this residence mortgage contemplating we are going to nonetheless be residing in our previous home?

Shubham Agrawal Senior Taxation Advisor, TaxFile.in, replies If the second home property is set free then you’ll have to provide the lease proceeds to tax, in any other case it will likely be deemed to be set free and you will want to supply a notional rental worth to tax. From this, you and your spouse will be capable of declare your complete curiosity paid on the house mortgage within the related yr. If the house mortgage curiosity paid is greater than the rental worth and customary deduction of 30% thereof, you may declare the set-off of steadiness from different heads of earnings as much as Rs 2 lakh. Any unadjusted loss may be carried ahead for eight evaluation years. Over and above this, the stamp responsibility, different registration fees and principal portion of residence mortgage instalment may be claimed beneath the general restrict of Rs 1.5 lakh beneath 80C by each you and your spouse.

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