My wife is a homemaker and has taken some general training on stocks from her friend (who is a sub-broker). As she feels idle at home, she has a wish to begin stock trading, to augment our income, on ICICI Direct.com. Her friend advised her that she could take an interest-free loan from me (instead of a bank) for the purpose. This will not be clubbed with my income and she will be filing her own IT-return for this income. Is it true? If yes, what precautions/ documents do we need to take/have? She has her pan PAN card.?
?M P Varshney
The risk behind extending an interest-free loan to your wife is that it can be assumed as a gift by you to her by the income tax officer. In such a case, clubbing provisions will apply and all her income from such funds will be taxable in your hands. Instead, we suggest you extend her a loan at a very nominal rate of interest, say what your funds earn in the savings bank. This 3.5% p.a. paid to you by your wife will be taxable for you. However, this would prove beyond any doubt that this is indeed a loan transaction at arms length between husband and wife and hence free from clubbing provisions.
I understand that capital gains on sale of property can be saved by investing the capital gains amount in bonds. The bonds have a lock-in of three years, after which your capital is returned back to you. My query is whether the original investment amount repaid at the time of maturity i.e. after the 3 years lock-in period — it will be taxable?
?Ashish
The original investment amount that is repaid at the time of maturity will not be taxable as it amounts to a capital receipt. Only amounts representing income are taxable, capital receipts are not taxable.
My son has an NRO account in the same bank in which I operate my resident savings account. The interest in both accounts is subject to TDS. However, the TDS certificate for my son?s NRO account displays tax deducted at the rate of 30%, while the TDS certificate for my savings account has tax deducted at the rate of 10%.
This, in spite of the fact that the amounts of interest in both accounts is almost the same.
My son?s only source of income in India is through interest on his savings. Is there any form that he can fill online or fax to the bank to stop further TDS deductions on his account.
?Sudeep
The TDS rates are different as are mandated under law.
Under the Income Tax Act, it is mandatory for the banks to apply TDS (= Withholding Tax) on NRO interest. There is no income threshold under which TDS is not chargeable. TDS is applicable @30.9% (plus surcharge, if any) on the entire NRO interest (without any threshold). The TDS is applicable on accrual basis on cumulative deposits. If his tax liability is less than the TDS, the only practical way to get the refund is to file the tax returns.
The TDS is not the same as his tax liability. This liability will be computed on the basis of the income tax rates, which again depend upon his income and the exemptions, deductions and rebates he can claim.
The TDS can be set off against his actual tax payable and pay only the difference. In case the TDS is higher than the tax liability, he will get a refund.
Form 15-G (for non-seniors) or 15-H (for senior citizens), requesting for non-application of TDS is not available for NRIs.
For residents, (an RNOR is a resident), TDS become applicable only when the annual interest from a branch of a bank is over Rs 10,000. The rate of TDS is 10% plus education cess @3%. In case the interest payable is over Rs 10 lakh, there is a surcharge of 10%.
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