Do senior citizens with income less than Rs 5 lakh need to pay tax on FD interest income?
You are eligible for a basic exemption of Rs 3 lakh plus a tax rebate under Section 87A on taxable income up to Rs 5 lakh for the financial year 2019-20.
Homi Mistry Partner, Deloitte Haskins & Sells replies: As a resident senior citizen, you are eligible for a basic exemption of Rs 3 lakh plus a tax rebate under Section 87A on taxable income up to Rs 5 lakh for the financial year 2019-20. Considering you qualify to be a resident for tax purposes, you will not be liable to pay income tax as your taxable income from all sources including interest on FDs is below Rs 5 lakh.
I purchased a DDA flat in August 2016 for Rs 21 lakh. I took a home loan of Rs 17.7 lakh and availed tax breaks between Sept 2016 and March 2019. In April 2019, I prepaid the loan. I bought this flat from someone who bought it from DDA for Rs 12 lakh in 2012. If I sell my flat today for Rs 21 lakh, what will be my tax burden? How can I reduce my tax burden?
Shubham Agrawal Senior Taxation Advisor, TaxFile.in replies: The flat will qualify as a long term capital asset as you have held it for more than two years. If you are selling the asset at the purchase price even after three years, this transaction will result in long term capital loss as the purchase price will be indexed to the cost inflation index. The home loan benefit claimed under Section 80C will be reversed in the year of sale and added to your income if the flat is sold before five years of purchase. The cost to original buyer is immaterial in this transaction.
Since your transaction will result in long term capital loss if sold at purchase price, there will be no taxability. Hence, there is no need to look at investment avenues. If you manage to sell the property at a higher value and that results in a capital gain, you may invest the same in avenues prescribed under Section 54 of the Income Tax Act.