We would like to have your valuable opinion on the below mentioned query:
1. If any person takes a Ulip of any insurer with or without insurance cover but does not claim any income tax rebate on this investment u/s 80C and gets it surrendered:
a) Within 5 Years
b) After 5 years
Then what would be the tax status on this investment.
?Robin K Garg
The period of 5 years is applicable only to Ulip of UTIMF and Dhanaraksha of LICMF, which are MF products. For the Ulips of insurance companies the normal period of 3 years is applicable. Where deductions of income have been allowed on policies which are terminated before premiums have been paid for three years, such deductions shall be deemed to be the income of the assessee for the year during which the policy is terminated.
Incidentally, Ulips have a lock-in period of three years now.
I have been contemplating retiring from my regular job soon and later work only on a freelance basis if possible. I would like to invest a certain sum in monthly income schemes of banks and earn a decent monthly income. I would like to know, assuming I fall in the 10% tax bracket, whether I qualify for standard income tax deduction, rebates on LIC and PF, mediclaim investments, etc on this monthly income.
?Fernando
All taxpayers, whether retired or otherwise can avail of the basic exemption limit as well as deductions on tax saving investments made by them. Therefore, you can indeed qualify for insurance, mediclaim, PPF deductions etc upon payments made in these schemes by you. By the way, if you fall in the 10% tax bracket, by making such investments, in all probability you will have to pay nil tax.
I am a Central government servant and I have read your article on availing of tax benefits on arrears under Section 89(1) of the Income Tax Act. In the said article, you have explained the instance where the employee receives the arrears of the past period in one installment. However, I request you to guide me, as to the calculation to be adopted where the arrears for the period from 01.01.2006 to 31.08.2008 would be disbursed in two installments, which is the case in the disbursement of arrears in the Sixth Pay Commission.
?Ravinathan
In the article, though the example was for only one year of arrears, the treatment for multiple years (which is on similar lines) was discussed.
You will need information for which year or years the first installment of arrears is being paid for. Then you will need to do the following calculations.
For the current year, calculate the tax payable after including the arrears and without including the arrears. The difference is the extra tax that you are paying on account of receiving the arrears.
Next, calculate the tax payable with and without the arrears for each year for which you are receiving the arrears. The difference is the extra tax that you ought to have paid had you received the arrears, not as arrears but as regular pay.
You need to subtract the aggregate of the extra tax that you ought to have paid from the extra tax that you are paying this year. Any positive difference is the Sec 89(1) deduction, a negative difference means that you cannot avail of any deduction.
I had invested Rs 1 lakh in an ELSS Tax saving scheme with a lock-in period of 3 years under dividend-reinvestment option. Now I have received a tax free dividend of Rs 20,000, which has been converted into units, since I opted for the dividend reinvestment option. Can I claim IT rebate for the reinvested amount of Rs 20,000?
?Murli
This point has been clarified in these columns earlier. Any dividend reinvestment in an ELSS fund is taken to be akin to fresh investment and is eligible for the Sec 80C deduction. Also, such dividend reinvestment would be subject to a lock-in of three years from the date of investment.
I was abroad for some time and hence missed the date for filing of tax return. Now what are my options? Can I file a tax return now? If so, would there be any penalty or fine payable?
?P N Ghosh
For FY 07-08, you may file a tax return till March 31, 2009 without having to pay any penalty. However, if any tax were payable by you, interest @1% pm will be payable from March 31, 2008 onwards, till such time that you actually pay the tax.
The authors may be contacted at wonderlandconsultants@yahoo.com