Note: This is the final part of a two-part series to answer all your income tax related questions. Click here to see the first part of this series.
In this final part, we will look at the common ITR queries along with tax implications on investments.
Can I avail HRA if I stay with my parents?
Your parents must solely own the home to claim a rent deduction. You cannot deduct the rent from your taxes if you share home ownership.
You must provide your rental agreement and rent receipts to be eligible for HRA, whether you live with your parents or in a rented home. You must ask your parents for a rent agreement, payment receipt, or a bank statement confirming the transfer to their account.
Under Section 80GG of the Income Tax Act, you may deduct rent if you are self-employed and reside with your parents.
I am an NRI. Do I have to file ITR in India?
According to the above income tax rules, an NRI's income tax in India will depend on their residential status.
Your international income is subject to tax in India if your status is "resident." If your status is "NRI," any money you make or earn in India is taxed here.
Examples of income made in India include salaries received or money received for services rendered in India, income from house property in India, capital gains on the sale of an asset within India, income from fixed deposits, and interest on a savings bank account. An NRI must pay taxes on these earnings.
You need to file an ITR if your income from all these sources exceeds Rs. 2.5 lakhs in a financial year.
What is tax harvesting in mutual funds?
Long-term capital gains on equity were tax-free up until 2018. In the 2018 Union Budget, they were rendered taxable but with an exemption. Long-term capital gains on equities up to ₹1 lakh in a fiscal year are exempt from taxes.
Therefore, if you have made an investment and have a gain of up to Rs. 1 lakh, you are not required to pay taxes if you sell your investment, realise your gain, and reinvest it. You will eventually realise gains from your investment that are not subject to taxes. Therefore, it is a method of harvesting profits to the degree that they are exempt.
How is the holding time determined for taxes when two equity schemes are merged?
In a scheme merger, the holding term would begin with the initial investment. Both the holding periods before and after the merger are included in calculating capital gain tax. This affects the investor's long-term capital gains tax treatment.
The investor only owes capital gains tax when they sell their stake after the merger.
Is dividend income taxable in India?
Under the current regulation, the investor or shareholder is responsible for paying taxes on any dividend received on or after 1 April 2020 as per their income tax slab.
TDS is typically applied at a rate of 10% on dividend income received from a firm or mutual fund above Rs. 5,000.
Is pension income taxable in India?
The pension that you receive as salary is taxable under Salary head. Pensions are normally paid out every month. However, you can choose a lump sum payment (also known as a commuted pension) in place of regular payments for your pension.
Any periodic pension payout or uncommuted pension is fully taxable as salary like any other individual.
In certain circumstances, a commutated pension or lump sum payment may be excluded from tax.
Commuted pension is fully tax exempt for government employees.
A non-government worker is only partially exempt from it.
If a pension is received along with a gratuity, a third of the pension that would have been received if the pension had been completely commuted is exempt from tax, and the remaining portion is taxed as salary.
Additionally, if the only pension is received and no gratuity is paid, half of the pension that would have been paid had the pension been fully transferred is exempt.
Is rental income taxable in India?
The income from the house or building is taxed under the heading "Income from House Property". It will be regarded as rental income and assessed as income from other sources if you have rented out a property to someone and received rent from it.
The property is subject to taxation based on its gross annual value (GAV). The tax is calculated after subtracting local taxes, the standard deduction, and the interest on a home loan (if any). You can take a standard deduction of 30% of the annual value to pay for things like repairs, renovations, etc.
Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.