Query 1]

I am a retired officer from central Government office on 31.12.2009 and have received gratuity, commutation of pension, encashment of leave, insurance and Provident Fund.

My queries are as under: –

  1. Whether the amount received as above is taxable and do I have to submit the return in March-2010?
  2. If I deposit the said amount in my name in the bank/ post office as FD or in the saving A/c, whether the interest received will be taxable?
  3. If I deposit the amount is split in the name of my sons, wife or any other relatives, whether the income on interest will be taxable in my name or against the individual name? [Z.H. Zaidi]


    A] Gratuity:
    In the case of Government employee, grauity amount is exempt from income tax u/s 10(10)(i) of the Income Tax Act- 1961.
    B] Commutation of Pension:
    Commuted pension received by a employee who has joined the Central Government before 01.01.2004 is fully exempt from tax u/s 10(10A)(i).
    b] The provision in respect of employee who has joined the Central Government on or after 01.01.2004 are covered by the New Pension scheme. The prominent feature of the new pension scheme is as under:
    i) New pension scheme is applicable to new entrants to Government service or any other employer. As per the scheme, it is mandatory for persons entering the service on or after 01.01.2004, to contribute 10% of salary every month toward their pension A/c. A matching contribution is required to be made by the employer to the said A/c.
    ii) Contribution by the employer to the notified pension scheme is first included under the head “Salaries” in the hands of employee.
    iii) Such contribution is deductible (to the extent of 10% of the salary of the employee) u/s 80CCD.
    iv) Employee contribution to the notified pension scheme (to the extent of 10% of the salary of the employee) is also deductible u/s 80CCD.
    v) When pension is received out of the aforesaid amount, it will be chargeable to tax in the hands of the recipient.
    vi) No deduction will be allowed u/s 80C in respect of amount on which deduction has been claimed u/s 80CCD. Also, the aggregate amount of deduction u/s 80C + 80CCC + 80CCD cannot exceed Rs. 1 Lacs.
    C] Leave Salary:
    In the case of Central/ State Government employee, any amount received as cash equivalent of leave salary in respect of period of earned leave at his credit at the time of retirement/ superannuation is exempt from tax u/s 10(10AA)(i)
    D] Insurance:
    Under Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax. However, this rule does not apply to following amounts:
    a) sum received under Section 80DD(3), or
    b) any sum received under a Keyman Insurance Policy, or
    c) any sum receive other than as death benefit under an insurance policy which has been issue on or after April 1 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the sum assure.
    E] Provident Fund:
    Lump sum payment received from Statutory Provident Fund received by the Government employee is fully exempt from income tax.
  2. If you deposit the above amount in your name in the bank/ post office as FD or in the saving A/c, Interest thereon shall be taxable.
  1. Deposit of amount in different Name & Tax Implications:
    a] in the Name of Major Son or Relatives (except spouse or Daughter-in Law)
    i) If the intention of your deposit in the name of different family members is to make YOUR OWN INVESTMENT without diluting the ownership of the Funds, then the income from the amount so deposited will be treated as your income only and will be taxable in his hands only.
    ii) If, however, the intention is to gift the say fund to the respective account holder at the time of deposit, then the income therefrom shall be treated as the income of the name bearer on the depository receipts (and will not be treated as your income).
    b] in the Name of Minor Son or Wife or Daughter-in-law:
    The interest income of the fund so deposited shall be taxable in your hand only by virtue of clubbing provision of section 64(1A) / 64(1)(iv) / 64(1)(vi) of the Income Tax Act-1961.

Query 2]

My mother has purchased a plot in Nagpur for Rs 30,000/- in the year 1998. She has paid a development fees of Rs. 32,000/- to NIT. Another Rs. 29,000/- she has spent for NOC, Mutation and 7/12 etc.  So the total Expenditure incurred was Rs. 91,000/-. In July-2009, she sold it for Rs 2,50,000/-.

Can you please help me out with the queries below:

  1. What is the capital gain?
  2. If we want to get an exemption u/s 54F, what is the procedure?
  3. My mother is a house wife and has no source of income nor is she holding any residential house property. As she doesn’t has a PAN card she is unable to buy any Capital Gain Bonds or open an account in Capital Gain Deposit Account Scheme?
  4. Does she need to fill IT return? [Krishanu]

Opinion :

  1. The gain in your case will be Long Term Capital Gain (LTCG). It shall be calculated by deducting Index Cost of acquisition and Indexed Cost of Improvement from the amount of Sale
  2. The sale consideration in your case is Rs. 2.50 Lacs. However, if the value adopted by the Stamp duty authorities is higher than Rs. 2.50 Lacs, then capital gain shall be require to be calculate by taking such higher value.
  3. Cost of Acquisition is Rs. 91, 000/-. It is presum that development and other expenses are incur in 1998 itself. The month in which the purchase is done is not mentioned in the query. It is presumed that the same is done on or after 01.04. 1998.
  4. Cost Inflation Index for the relevant financial years are as under:
F.Y. C.I.I
2009-2010 632
1998-1999 351
  1. The indexed cost of acquisition in the given case shall be Rs. 1,63,851/- (91,000/- *632/351).
  2. The Long term Capital Gain taxable in the hands of your mother shall be Rs. 86,149/- [2,50,000/- (–) 1,63,851/-].

Since your mother
a) does not have any other source of income and
b) the amount of LTCG is less than the basic exemption limit available to Women assessee,
Entire LTCG would be tax free.


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