Readers' Corner: Taxation

Kuldip Kumar, partner and leader, personal tax, PwC India, answers your questions

How is the interest on non-convertible debentures (NCDs) taxed? Is it at the time of maturity or when the interest is paid?

You have not mentioned the nature of the NCD and what are the terms of payment of interest, yearly or cumulative, or if these are in the nature of deep discount bonds, etc. Where there are periodic interest payments due on such an NCD, such interest should be taxable on an accrual basis. The principal amount received on maturity is not taxable. However, in sale of an NCD before maturity, the arising gain shall be taxable as capital gains depending on the period of holding. In listed debentures (held for less than 12 months), the arising gain shall be short-term capital gains and taxable at the normal slab rates applicable to the taxpayer. If held for more than 12 months, the arising gain shall be taxed as long-term capital gain at a concessional rate (10 per cent plus applicable surcharge and education cess) without indexation benefits. In the case of non-listed debentures, a holding period of 36 months qualify for long-term capital gains. Such long-term capital gain is taxed at 20 per cent (plus applicable surcharge and education cess) without indexation benefits.

I have donated money to a non-governmental organisation. May I give the receipt to my office to get tax exemption or should I show it while filing taxes?

Under Section 80G of the Income Tax Act only specified donations are eligible for tax benefits. I assume the donation you made is so eligible. Generally, the Central Board of Direct Taxes issues a 'master circular' every year, providing guidelines to the employer for withholding on salary of employees. The circular for FY16 has not yet been issued and, therefore, the master circular issued for FY15 can be referred to. You can present the receipt to your office once the donation is made. The office finance/payroll department shall take this into consideration and allow you the tax benefit while doing the withholding of tax on your monthly salary. Please note no deduction is allowed under Section 80G where a donation in excess of Rs 10,000 is made in cash. You need not attach the receipt with the return of income but must give the requisite details in the return form such as the name of donee, address, permanent account number, etc. However, carefully preserve the original donation receipts because these might be asked for by the tax authorities in case of any scrutiny/audit of the return at a later stage.

The views expressed are expert's own. Send your queries to yourmoney@bsmail.in