Financial News. Simplified
Special Edition

This special edition may not be of interest to many, as the India’s Census 2001 states that out of over 100 crore of population only 7.5% constitutes Senior citizens (age group of 60 years and above). But think again, you may be young and vibrant now but old age is a harsh fact of life. No one can escape it. Yet we totally disregard it many a times. May it be wealth wise or health wise we ignore to the extent we can. So please give due attention to this stage of your life cycle and plan your finances accordingly. But for doing so, it is essential that you are aware of the tax laws - especially the Income Tax laws affecting you, along with the amendments thereto. And since the Budget 2012 is round the corner, there have been certain recommendations put forth by the standing committee of the parliament which are worth a mention.

The standing committee, headed by Mr YashwantSinha (former Finance Minister) has recommended that in the Direct Taxes Code (DTC) - which is set to replace the 50 year old Income Tax Act, 1961, there should not be any Tax Deducted at Source (TDS) on interest earnings of senior citizens from their fixed deposit investments. Similarly, the committee has also suggested that a non-resident should not face any TDS if his income does not accrue in India which is clearly mentioned in the existing Income Tax Act as well. But interestingly a noteworthy point is that the DTC lacks an explicit provision on this. Instead it overrides the provisions under double taxation avoidance agreements if the tax authorities feel that income had accrued in India. This provision was specifically brought in, to prevent any abuse of the treaty provisions that caused loss of revenue. However, the committee wants a specific provision in the DTC to clear this uncertainty.

Impact of such an initiative on investors (Senior Citizens)...
At present Senior citizens have an option to prevent TDS on their interest income by submitting Form 15H if there is no taxable income. However, if one fails to provide the same then 10% tax is deducted at source on the interest income in excess of Rs 10,000.

 

Our view:

We believe that the proposal to do away with the TDS on interest earnings of Senior citizens will be extremely beneficial to the Senior citizens of our country. This will instil public confidence in the Government and at the same relieve the Senior citizens from the hassles of claiming tax refunds in case they fail to submit the Form 15H in order to avoid the TDS on their interest income.

At the same the Income Tax authorities also need to keep a vigil on suspicious transactions if any routed through any Senior citizen account in order to evade tax laws of the country. Proper checks and balances undertaken at the onset of a transaction will go a long way in curbing the menace of money laundering and tax evasion.

 

Disclaimer: This newsletter is for Private Circulation only and not for sale, is only for information purposes and Quantum Information Services Pvt Limited (PersonalFN) is not providing any professional/investment advice through it and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. PersonalFN disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this newsletter, including without limitation the implied warranties of merchantability and fitness for a particular purpose. PersonalFN and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this newsletter. Use of this newsletter is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. PersonalFN does not warrant completeness or accuracy of any information published in this newsletter. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This newsletter is for your personal use and you shall not resell, copy, or redistribute this newsletter, or use it for any commercial purpose. Please read the terms of use on this web site.

Add Comments

Comments

larosa@thenjmarketplace.com May 11, 2012 If you itemize (see if your itemized deductions on 1040, Schedule A exceed your standard deduction, which is $10,700 for married filing joint, $7850 for head of household, $5350 for single or married filing separate in '07), you may deduct EITHER state and local income taxes OR your state and local general sales taxes. You cannot deduct both. You make your election on line 5 of Schedule A by checking box a for income taxes or box b for general sales taxes. The option to claim sales taxes instead of income taxes will not be allowed following 2007 unless Congress extends the law permitting this option.

 1