TAX TALK- 05.10.2009-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“CHANGES IN TDS RATES……”
Query 1]
Sir, I am farmer. I produce vegetables (Tomato, Lauki, Karela, Khira, Papita, Bandi, Gobi) in 20 Acres of land. My farm is well equipped with DRIP Irrigation system. I have availed Rs. 5.00 Lacs loan facility from SBI. My income from this activity in the last year (i.e., from 01-06-2008 to 30-05-2009) was Rs. 5,00,000/-. The annual income normally varies from Rs. 4 Lacs to Rs. 7 Lacs. Total sales varies from RS. 20 Lacs to Rs. 30 Lacs and savings after all expenses ranges from Rs. 4 to Rs. 7 Lacs as mentioned above. I have never filed any income-tax return so far.
Please advice as to whether: 1. should I file income-tax return?
2. I propose to purchase a house in Durg city costing Rs. 15 Lacs. What account or papers I should keep? [Narayan Chawde, Durg]
Opinion:
Plainly & simply speaking, filing the return of income is mandatory for persons who have TAXABLE income above basic exemption limit. If you don’t have the TAXABLE income, filing the return of income is not mandatory.
It may be noted that Agricultural income is Exempt from income tax u/s 10(1) of the Income Tax Act, 1961. Any income from the sale of any produce (of any land situated in India and used for agricultural purpose) to the cultivator is agricultural income provided the produce is not subjected to any process except process ordinarily employed to make it fit for taking it to market.
In some cases, however, the agricultural income is taken in to consideration to find out tax on non agricultural income.
The income for income tax purpose is required to be computed on the basis of financial year from April to March.
You should keep all the documents that justifies your agricultural income & may enable you to explain your source of investment. The documents to substantiate your claim may be the Records of the Patwari / Local authorities, Fertilizer bills, Vegetable sale documents, etc.
Query 2]
Sir, this is in reference to your article Tax-talk dated 21st Sept. 2009 in The Hitavada . In Query 2 you have said that the legal heirs can save capital gain tax arising on sale of inherited plot of land by investing the sale proceeds in instruments covered under Section 54EC or by investing the proceeds for purchase of another residential house property u/s Sec 54F.
However , in similar situation , my lawyer has suggested that if legal heirs make a MOU & Settlement with the objective of avoiding friction and maintaining harmony amongst the heirs and then sell the land and other inherited assets , then the capital gains will not occur because it will not be regarded as Transfer.
They can then divide the total proceeds amongst themselves and show it as assets and receipts received by way of WILL & Inheritance, the receipts which are Tax Free. Please comment whether it is correct view and advise. If not, suggest something better. [nagarwal06@yahoo.co.in]
Opinion:
It appears that you are talking about the family settlement amongst the family members and the legal heir wish to transfer the land/immoveable properties etc to other legal heir to avoid friction and conflicts. If it is so & the transfer doesn’t involve any monetary consideration, the transaction would be tax neutral.
If however, the legal heir dispose off the assets by way of sale after inheritance then it may not be tax free transactions even though the sale proceeds therefrom is subsequently distributed amongst the family members to avoid the possible conflicts. The distribution of sale proceeds amongst the family members shall be recognized as an application of income and tax liability will be there on the legal heir who is disposing off the assets.
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“CHANGES IN TDS RATES……”
Query 1]
Sir, I am farmer. I produce vegetables (Tomato, Lauki, Karela, Khira, Papita, Bandi, Gobi) in 20 Acres of land. My farm is well equipped with DRIP Irrigation system. I have availed Rs. 5.00 Lacs loan facility from SBI. My income from this activity in the last year (i.e., from 01-06-2008 to 30-05-2009) was Rs. 5,00,000/-. The annual income normally varies from Rs. 4 Lacs to Rs. 7 Lacs. Total sales varies from RS. 20 Lacs to Rs. 30 Lacs and savings after all expenses ranges from Rs. 4 to Rs. 7 Lacs as mentioned above. I have never filed any income-tax return so far.
Please advice as to whether: 1. should I file income-tax return?
2. I propose to purchase a house in Durg city costing Rs. 15 Lacs. What account or papers I should keep? [Narayan Chawde, Durg]
Opinion:
Plainly & simply speaking, filing the return of income is mandatory for persons who have TAXABLE income above basic exemption limit. If you don’t have the TAXABLE income, filing the return of income is not mandatory.
It may be noted that Agricultural income is Exempt from income tax u/s 10(1) of the Income Tax Act, 1961. Any income from the sale of any produce (of any land situated in India and used for agricultural purpose) to the cultivator is agricultural income provided the produce is not subjected to any process except process ordinarily employed to make it fit for taking it to market.
In some cases, however, the agricultural income is taken in to consideration to find out tax on non agricultural income.
The income for income tax purpose is required to be computed on the basis of financial year from April to March.
You should keep all the documents that justifies your agricultural income & may enable you to explain your source of investment. The documents to substantiate your claim may be the Records of the Patwari / Local authorities, Fertilizer bills, Vegetable sale documents, etc.
Query 2]
Sir, this is in reference to your article Tax-talk dated 21st Sept. 2009 in The Hitavada . In Query 2 you have said that the legal heirs can save capital gain tax arising on sale of inherited plot of land by investing the sale proceeds in instruments covered under Section 54EC or by investing the proceeds for purchase of another residential house property u/s Sec 54F.
However , in similar situation , my lawyer has suggested that if legal heirs make a MOU & Settlement with the objective of avoiding friction and maintaining harmony amongst the heirs and then sell the land and other inherited assets , then the capital gains will not occur because it will not be regarded as Transfer.
They can then divide the total proceeds amongst themselves and show it as assets and receipts received by way of WILL & Inheritance, the receipts which are Tax Free. Please comment whether it is correct view and advise. If not, suggest something better. [nagarwal06@yahoo.co.in]
Opinion:
It appears that you are talking about the family settlement amongst the family members and the legal heir wish to transfer the land/immoveable properties etc to other legal heir to avoid friction and conflicts. If it is so & the transfer doesn’t involve any monetary consideration, the transaction would be tax neutral.
If however, the legal heir dispose off the assets by way of sale after inheritance then it may not be tax free transactions even though the sale proceeds therefrom is subsequently distributed amongst the family members to avoid the possible conflicts. The distribution of sale proceeds amongst the family members shall be recognized as an application of income and tax liability will be there on the legal heir who is disposing off the assets.
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