Taxation: Homi Mistry
I retired last year and now work as a consultant on an hourly basis. My earnings do not exceed Rs 5 lakh annually. But, is it advisable to not file returns?
Assuming you are a senior citizen (60-79 years), tax laws make it mandatory to file a return if your taxable income is above Rs 2.5 lakh. Therefore, if net income is about Rs 5 lakh, it is mandatory. However, if after expenses, net income falls below Rs 2.5 lakh, you are not required to file returns. Although, you may still do so for the sake of continuity.
I recently won Intel's ‘Win an island for a month’ contest. The prize is a six-night/seven-day trip to Indonesia. The estimated cost of it is a little over $10,000 (approximately Rs 5 lakh). Am I liable to pay tax on such winnings received in kind? If yes, how much? How will the tax be calculated?
Winnings from any game would be considered as income and are subject to tax at the rate of 30 per cent plus cess. The effective tax rate will be 30.9 per cent. The value of the winnings will be the actual cost of the trip, in this case Rs 5 lakh. If the income by way of winnings exceeds Rs 10,000, it is the responsibility of the person paying for such winnings to deduct tax on the same. If the winnings are in kind, the person responsible to pay for such winnings should ensure the tax is deposited. Thus, it is Intel’s responsibility to ensure the taxes are remitted to the government before releasing the prize. For this purpose, Intel may recover the tax deducted at source or TDS amount from you before releasing the prize.
I want to gift shares that I hold to my son. In such a case, what cost price will be considered from my son's perspective — the cost at which I bought the shares or the value of shares at the time of gifting? Will I need to make a deed for this on a Rs 5 stamp paper and list all the shares?
In case you bought the shares on or after April 1, 1981, the cost price for your son will be the cost at which you bought the shares. In case you bought the shares before April 1, 1981, the cost price for your son will be the fair market value of the shares as on April 1, 1981 or cost at which you bought these, whichever is higher. It is not mandatory to make a gift deed under the income tax laws, although it is recommended.