Is tax saving your New Year resolution? Here are some tips

In an interview to CNBC-TV18, Tax & Investment Consultant Subash Lakhotia shared his reading and outlook on tax planning and investments. He throws light on some schemes which investors can look at for saving tax.

Below is the edited transcript of his interview on CNBC-TV18. Q: Most people leave tax planning till the very end, are there any new tax saving options that have come up? For those of us who have slept for the first nine months, what is your advice? A: The point is in the first stage apart from taking the benefit of section 80C, the tax payer should also take care of certain new vistas which are available for taking home tax planning ideas and vistas. Firstly, the tax payer should take advantage of the provision of new section 80CCG (Rajiv Gandhi Equity Saving Scheme, RGESS). It is for the first time investors in the stock market, if they make an investment upto Rs 50,000 then they will get a special tax deduction, which unltimately will result as tax saving for them. One must remember that maximum amount of investment is only Rs 50,000 and deduction is at the rate of 50 percent, which would mean tax saving to the tune of Rs 2,500 to 5000. Unfortunately, tax payers having income of more than Rs 10 lakh cannot take advantage of this scheme. Secondly, it only for a new investor that is if you are holding some shares then you cannot take advantage of this new scheme of 80 CCG. I think this is a good scheme and one should take advantage of this new scheme. Q: It is quite possible that most of our viewers will already be investors of some kind. Is it possible that they can take advantage of this by buying shares say on mother’s name or on a relative who does not own shares at this point in time, who therefore doesn’t have a demat account, is that a legitimate levy? A: It is a big no. If I have the stock market transactions with me right now, investing in the name of my mom or some other family member will not bring any tax saving to me. But yes, it is possible indirectly that is if your mother, father, brother, sister they are also tax payers and they do not have a demat account, they can open demat account, invest in the stock market and save income tax but that saving cannot benefit you. So, the point is those who are tax payers only in their individual names if they make the investment they are going to benefit not the other relatives. Caller Q: I have two demat accounts one is solely in my name and the other I hold jointly with my wife. Will I have to pay capital gains tax, if I transfer shares between these two accounts? A: Merely transferring certain shares from one demat account to another demat account, there is no liability of paying capital gains tax. Do remember capital gains tax on selling shares or any other capital asset is payable only when you sell the asset. In this case you have transferred certain shares from one demat account to another demat account, that is it. So, no liability of capital gains. But if you are transferring these shares to your spouse then it is no good because due to direct or indirect transfer to the spouse, at later point of time whenever these shares are sold the income will not be treated of your wife but will be treated of yours. As far as possible do avoid transferring your shares to your spouse. Caller Q: I am a salaried employee and my company is cutting tax deducted at source (TDS), I have been filing my returns regularly but I have an old fixed deposit (FD), about five years back I had made it and I forget about that. I have not included the maturity amount in my IT returns last years, so how do I rectify that? A: Don’t worry at all, the repayment of the fixed deposit amount, remember the principle amount is not at all to be included in your income. What is required to be included in your income is the interest on the bank fixed deposit. Now, we find that you have not been able to declare the interest income from the bank FD in your return and the simple answer is, file a revised income tax return. In the new revised income tax return whatever are the applicable taxes pay those taxes, include that income from bank FD and relax.