Inheritor won’t pay LTCG tax
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QI have a fixed deposit with State Bank of India. The bank wants to deduct TDS at the rate of 20 per cent since I do not have a PAN. Whether the splitting up of my investments in such a way that my income from each such investment is below tax deductible limit will be of any help? What is the other option? If I apply for a PAN, will it be necessary that I file my income tax returns compulsorily? MOHITH Bengaluru
According to Section 206AA ( 1), deductor will have to deduct the tax at the rate of 20 per cent at source if the recipient does not furnish his Permanent Account Number ( PAN). Even a declaration would be invalid under sub section 2 and 3 of the same article if PAN was not mentioned in it and the deductor would have to deduct tax at source on “any sum or income or amount on which tax is deductible”.
It is suggested that you apply for PAN immediately so that you stay away from all these hassles. Otherwise, you may need to spread your investments with various banks, which again would become inconvenient and tedious. You need to file your income- tax returns only if your income exceeds the threshold limit specified in the IncomeTax Act.
QMy brother had sold a plot of land in February 2017 and deposited the sale amount ` 64 lakh in capital gains scheme in July 2017 to save capital gain tax. He is intending to purchase a flat before two years i. e. February 2019. I wanted to know whether this amount will be taxable if the amount was not utilised for the purchase of a house before the stipulated date. My brother is also suffering from cancer and is in a critical condition. Kindly clarify whether the tax treatment will be different if the person dies before the stipulated period? MOHAN Via email
If the amount deposited in Capital Gains Accounts Scheme is not utilised for the specified purpose mentioned within the specified period of two years or three years, as the case may be, the unutilised amount shall be charged under Section 45 as capital gain of the previous year after such period expires.
The tax treatment, however, will be different if the assessee expires before the stipulated time and the amount is received by the legal heirs.
The CBDT has, in Circular No. 743 dated 6.5.1996, clarified that in the event of death of an individual before the stipulated period, the unutilised amount would not be chargeable to tax in hands of the legal heirs of the deceased individual, since such unutilized amount is not income but is a part of the estate devolving upon them. However, your brother is advised to choose the option of construction of a residential house, wherein the stipulated period extends to three years i. e up to February 2020. It is suggested that if you are unable to purchase a residential house before the stipulated two year period, the option of a three year period for construction may be utilised to his advantage, at least the tax liability gets postponed by one year.