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20% tax on gains from debt fund

That I am a pensioner from Power State Power Corporation Ltd. That I got a ULIP Policy for Rs 30,000 of UTI in the year 1993 with a policy term of 10 years. The yearly premium was Rs3,000 and maturity value at the end policy of 10 years (1/1/2003) was Rs30,000.

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SC Vasudeva

Q. I wish to submit as under:

1. That I am a pensioner from Power State Power Corporation Ltd.

2.  That I got a ULIP Policy for Rs 30,000 of UTI in the year 1993 with a policy term of 10 years. The yearly premium was Rs3,000 and maturity value at the end policy of 10 years (1/1/2003) was Rs30,000.

3. That the premium of Rs30,000 was paid as stated above:

4. On 29/03/2019 I applied for redemption of units of the above policy and the sale proceeds of Rs2,91,076 was credited to my savings bank account on 02/04/2019.

5. As per the statement dated 03/04/2019  for the period from 01/04/1970 to 03/04/2019 issued by UTI, Rs 2,55,393.18 has been shown as long-term capital gain  (LTCG) without indexation and Rs 1,92,052.47 has been shown as LTCG with indexation. Further, Rs 494.15 has been shown as short-term capital gain.

My queries are as under:

a) Whether the amount credited to my account on 02/04/2019 is to be accounted for in the FY 2018-19 or 2019-20 because I applied for redemption on 29/03/2019 but the payment was made on 02/04/2019.

b) Whether the amount shown above as LTCG is exempted from income tax (being ULIP Policy) or the said amount is taxable.

c)  If the LTCG is taxable, then which figure of LTCG is to be considered (i.e. with or without indexation) and at what rate the tax is payable and the total tax to be paid for this LTCG as well as for the short-term capital gain shown above. The relevant section of the I-T Act may please also be given.

—Harjit  Singh

In your query, you have not stated the sum assured so as to ascertain whether the proceeds are exempt under Section 10(10D) of the Act or not. If there is no sum assured, then, in case the fund is equity-oriented, the benefits of indexation would not be available and the entire long-term capital gain will be taxable @10% above Rs 1,00,000 as per the provisions of Section 112A of the Act. The long-term capital gain for the purposes of section will have to be computed in the manner laid down in said section i.e. by deducting cost from the sale price.  Cost for this purpose will be higher of:

(a) Cost of acquisition and 

(b) Lower of net asset value (NAV) as on 31.1.2018 & sale price. If, however, the fund is a debt fund, then indexation will be allowed and gain of Rs 1,92,052.47 will be taxable @ 20% as per Section 112 of the Act.


Q. I have opened a private irrevocable trust wherein my son is the sole beneficiary. He has been filing his ITR for the past about 30 years.  Please advise on the following:

An irrevocable private trust having single beneficiary is taxed like an individual. Trust being an independent entity, can he continue filing his return with his own income from interest or his income will be clubbed with that of the trust?

—Jugal Kishore

The trust will be assessed separately and the trustee appointed under the trust shall be deemed to an assessee for the purpose of the provisions of income-tax Act, 1961 (The Act). This is in accordance with the provisions of Section 160(2) of the Act. The income of your son would not be clubbed with the income of the trust. However, in case the income of the trust consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which the trustee is so liable at the maximum marginal rate.


Q. I am a government employee aged 53 years. My queries are as under: My son is 21 years old and working in a private firm, having a disability certificate (mental illness 65%). His salary income Rs 2,00,000 (annually) + bank FD interest Rs 40,000. He files his income tax return from FY 2017-18. He is not paying any income tax. Due to disability, he has not claimed any rebate in income tax under Section 80U. He is dependent on me. Can I claim income tax rebate under Section 80DD. My annual income is Rs10,00,000. Please advise. —AK Singla

You can claim deduction under Section 80DD if you have incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependent being a person with a disability. It may be added that since your son is having a salary income, it may be difficult for you to prove that he is dependent on you for medical treatment, training and his rehabilitation.  It would be advisable for your son to claim a deduction under Section 80U of the Act in case his disability is within the norms prescribed under the said section.

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