Ever since I retired five years ago, I have not taken up any job. Now at 65, I have a consultancy work offer. The company will deduct tax at10% on the monthly payment. How do I compute my final tax liability? Is the TDS that is deducted enough or will I be liable to pay further tax?

?Janardan

Your earnings will be considered professional/business income. From this, you can reduce the expenses actually incurred by you for earning this income (such as travel expenses, stationery and other similar expenses). The balance will be added to your other normal income and you will have to pay tax on that total income depending on which slab you fall in. The amount deducted at source by the payer of the income will be reduced from the tax and the balance will have to be paid by you as advance tax.

However, there is the aspect of service tax that you will have to consider. As a consultant, you are rendering a service and if your income is above Rs 8 lakh, you will have to pay 12.36% service tax.

In the ITR-2, which is being filed this July, it says that dividend has to be classified for special rate of tax of at10%. It also states under schedule EI that income from interest or dividend, is exempt from tax. Could you please clarify if there is a certain slab or limit for exemption. Is bank interest exempt or fully taxable?

Given that dividend money is tax free, would a resident Indian having income from salary, bank interest and share / MF dividend have to fill the ITR-1 or ITR-2 form.

?Nirantar Lal

The new ITR is a comprehensive form meant for all kinds of investors like NRIs, etc. Therefore, the different tax rates appear. In the case of a resident, dividends from all sources are tax-free whereas bank interest is fully taxable. ITR-1 has to be filled only for those having income from salary, pension and interest. If you have income from dividends or capital gains etc., you will have to file ITR-2.

I would like to know whether NSC of post office( including interest thereon), bank deposits for 5 years and PPF are eligible investment under section 80C deduction for HUF?

Are there any other types of investments eligible for HUF?

?Niraj

RBI Notification GSR291(E) dt 13.5.05 has discontinued opening of the accounts on behalf of HUF, AOP and BOI with immediate effect. Such accounts opened by mistake shall be treated as void ab initio. As and when the error comes to light, the account shall be closed and the amount refunded to the depositor without any interest. The existing accounts can continue up to their maturity without the privilege of post-maturity continuation. SO289 (E) dt 13.05.05 has similarly prohibited HUFs from buying NSCs.

Notified bank term deposits of 5 years are eligible for HUFs. Other avenues are life insurance contributions, equity-linked savings schemes of MFs, unit-linked insurance plans, etc.

My relative had a PPF a/c and had nominated his wife and son as nominees. He expired on May 21, 2007. Unfortunately, his wife died on June 15, 2007 before the application for repayment of PPF amount could be made. How do the provisions regarding the payment of the balance of PPF to the surviving nominee apply?

?Sharad Hatekar

The PPF Act and scheme 06-07 states that if a subscriber dies, the nominee(s) may make an application in form G to the accounts officer together with proof of death of the subscriber and on receipt of such application, all amounts standing to the credit of the subscriber after making adjustments, if any, in respect of interest on loan taken by the subscriber shall be repaid by the Accounts Officer itself to the nominee(s).

If any nominee is dead, the surviving nominee or nominees should in addition to the proof of death of the subscriber, also furnish proof of the death of the diseased nominee.

The Act also states that the nominee does not automatically become the owner of the fund. Nomination is a device for collecting the funds smoothly and handing these over to the trustees appointed by the will of the deceased person for distribution as directed by the will.

The accounts officer shall pay to the surviving nominee the entire balance in the PPF account of the subscriber. However, if there were more than two nominees with defined percentages of their share and if one of them dies, the situation could give rise to some confusion.

For instance, if there are three nominees A, B and C having a share of 50%, 30% and 20% respectively, and A has expired, will B and C get 55% and 45% or 60% and 40% or any other ratio? Consequently, different accounts offices may follow different methods of distribution.

?The authors may be contacted at wonderlandconsultants@yahoo.com