For 36 months, I had invested ₹1,000 every month in SIP mode in a mutual fund. Now, it’s been a year since the date of the last monthly investment. Please let me know the LTCG (long-term capital gains) tax implications if I make partial withdrawal or opt for a systematic withdrawal plan of ₹1,000 every month.

VD Koteswara Rao

For the purpose of taxation, every SIP is treated as a fresh investment, and gains on them are taxed separately. In your case, withdrawal of funds (either in lump sum or through a systematic withdrawal plan), shall be treated as LTCG on a presumption that such investments are into specified equity-oriented funds and understanding that you have held the investments for more than 12 months.

LTCG of up to ₹1 lakh on sale on such MFs (on or after April 1, 2018) shall be exempt from tax. Amounts exceeding ₹1 lakh shall be taxable at 10 per cent (without any indexation for cost inflation).

I am a senior citizen with an annual pension of ₹3.1 lakh. I get a fixed-deposit interest of ₹3 lakh. Can I submit Form 15H as the law permits exemption of ₹3 lakh, plus ₹40,000 standard deduction and ₹50,000 interest deduction?

N Kalyanasundaram

As per the provisions of Section 194A of the I-T Act, banks are required to deduct TDS at the time of payment of interest income on fixed deposits exceeding ₹10,000 (₹50,000 in case of senior citizens).

However, Section 197A(1C) provides an exception to the provisions of Section 194A, wherein banks are not required to deduct TDS in case of a resident individual who is of the age of 60 years or more in specified cases (which includes interest on FDs). As per the provisions, an individual who has nil tax due on his total income in a financial year can make such declaration to the bank in Form 15H, and the bank shall not deduct TDS on interest payments.

Considering the pension received is taxable (on account of retirement from your employment), the same has to be considered to calculate the estimated tax liability (subject to eligible exemptions/deductions under the Act).

Since you are a senior citizen, income of up to ₹3 lakh is not chargeable to tax. Further, you shall be eligible for a deduction of ₹50,000 under Section 80TTB of the Act for interest income and ₹40,000 under Section 16(ia) of the Act as a standard deduction against your pension income.

Accordingly, your taxable income shall be ₹5.2 lakh (i.e. ₹3 lakh + ₹3.10 lakh, less deduction of ₹90,000). As the same is more than the exempted threshold of ₹3 lakh, you have tax due for the financial year.

Hence, you shall not be eligible for the benefit of no deduction of TDS by filing of Form 15H. However, you may explore the possibility of claiming a lower withholding tax certificate from income-tax authorities under the provisions of Section 197 of the Act. If such certificate is granted, the same can be submitted to the banker who shall deduct tax at such lower rate.

The author is a practising Chartered Accountant.

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