To avoid clubbing provisions, I cannot give a gift to your wife and you to my wife. This is a cross gift not approved by the tax authorities. Gifts by you to your mother would be treated as cross gifts. However, if the gift is out of your own personal income or the interest income on the gifted corpus you have earned over the years, there should be no problem. Forget gift to your son or wife. Entire income earned by your minor son will be taxed in your hands. Unfortunately, in respect of clubbing provision, the tax authorities treat all wives and daughters-in-law as minors for ever. Only difference is that income on income is not clubbed in their case.I have some suggestions. After crossing the minimum threshold of taxable income, you can invest in dividend-paying schemes of MFs and earn up to Rs 15,000 which is deductible u/s 80L. Even after reaching that stage, you can use PPF or bonds of infrastructure companies to remain out of the tax net. It is now possible for you to earn as much as Rs 1.40 lakh and still pay no tax by taking advantage of Sec. 80L and Sec. 88. I would prefer your father to stop giving gifts in bits and pieces. Now that there is no minimum threshold for giving gifts and there is no tax on any gift, irrespective of its size, he should give as much as he desires at one go. Take this action as soon as possible. I am expecting reincarnation of GTA to take place in a short time.
As per CBDT Circular No. 648 dated 30.3.93, LIC agents having total commission (including first-year commission, renewal commission and bonus commission) of less than Rs 60,000 for the year and not maintaining a detailed account for expenses incurred by them, may be allowed an ad hoc deduction as follows:
Where separate figures are not available, 33.33 per cent of the gross commission.
In both the above cases, the ad hoc deduction will be subject to a ceiling of Rs 20,000.The `gross commission' includes the first-year as well as the renewal commission, but excludes bonus commission.
Benefit of ad hoc deduction will not be available to agents with a total commission of more than Rs 60,000 during the year.
Incentive bonus earned by LIC development officers will be taxable as salary. Consequently, it will not be eligible to any deduction, ad hoc or otherwise, other than the standard deduction on salary u/s 16(i) [K A Choudhary v CIT (1990) 183ITR29].
Is the presumptive tax only and exclusively for the so-called `new' taxpayers? Please discuss all pros and cons.
--Dara P Sopariwala, Pune
The one and only purpose of presumptive tax is to rope in new taxpayers. There are quite a number of persons who have started a business in a small way and because of their efforts and diligence, have succeeded in increasing their income over a period. Most of them are willing to pay taxes but do not have sufficient knowledge, ability or time to maintain books of accounts properly. If they volunteer to pay tax as a good citizen, the ITOs are likely to make their life miserable, especially in the absence of proper books. Therefore, amnesty is offered for entry into the tax net.
When the scheme was first introduced, it was applicable for only two years which was considered to be sufficient time given to the assessee to get himself organised with the accounts. I had observed: ``The traders may hesitate to get themselves on the registers of the Department and may continue to avoid filing returns unless they know what would be their fate after two years. The main idea is to bring as many people as possible on their records and such methods are bound to fail miserably.''
Later, good sense prevailed and the Finance Act 1994 has made this scheme open-ended.
Even then, there was a small repulsive feature. It was open to those who have income up to Rs 47,000 from business or vocation and an annual turnover up to Rs 6 lakh and whose income chargeable to tax from any other source does not exceed Rs 5,000 in a year in the aggregate. In other words, the ITO has the right to ensure that the turnover is less than Rs 6 lakh.
I only wish this scheme was thrown open to everyone, rather than opening it up for small traders in the first year, then persons in civil construction and truck operation next year, then another small category next year and then...
Now, FA97 has discontinued all presumptive tax schemes because these have been found to be unsuccessful. Sorry, I am wrong. New Sec. 44AF has introduced the `Estimated Income Scheme' for retail traders which levies tax presumptively at 5 per cent of the total turnover. This is applicable only to those persons whose total turnover is less than Rs 40 lakh during the financial year. For previous cases, no expenses or deductions will be allowed, inclusive of depreciation. However, if the business of retail trade is conducted by a partnership firm, the interest or salary paid to a partner within the prescribed limits of Sec. 40(b) will be allowed as a deduction.
PPF account gets credit from the date of presentation of cheque and as such interest is paid on the amount of cheque if presented on or before fifth of the month but realised subsequently. Please advise the position in this regard in respect of NSS. Is the interest paid if the cheque is presented on or before the 10th but realised later?--M K Ghodsar, Nagpur
The privilege of earning the credit on the date of presentation of the cheque is enjoyed only by PPF (and UTI). In all other cases, (including NSS and NSC) it is the date of realisation which is taken into account. In case of PPF, interest for the full month is given on the minimum balance in the account between the 5th and the end of the month, whereas, in the case of NSS-87 and NSS-92, the date is 10th of the month. Schemes under the same wing have different systems and procedures.
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