Your Taxes

I will be retiring from service next year and will get a good lump sum. I plan to deploy some of the money in the Senior Citizens Savings Scheme (SCSS). But I am not sure about how much I can invest and the tax break on it. Is it eligible for deduction under Section 80C? What about the tax treatment on interest?

-Ravi

As per the SCSS Rules, 2004, an individual who has attained 60 years of age or who is 55 years old and has taken voluntary retirement or is a retiring defence personnel (subject to certain specified conditions) may open an account under the scheme.

The investment is required to be made in multiples of ₹1,000. Therefore, the minimum amount to be invested is ₹1,000. The maximum investment allowed is the eligible lump-sum retirement benefits received (provident fund, gratuity, commuted pension, etc) — up to ₹15 lakh.

The interest income from this scheme is credited on a quarterly basis which is considered taxable without any specified deduction. Contribution/investment in SCSS is allowed as deduction under Section 80C, which has an overall specified limit of ₹1.50 lakh. Also, post office/banks are required to deduct tax at source (TDS) if the interest pay-out exceeds ₹10,000 in a financial year.

My daughter, an NRI, is a student in the US on F1 student visa, and gets Research Assistantship (RA) from a university there. She gets deposit interest income from an NRO account in India. Will she have to file the ITR 2 form with the RA earning details under the FSI (Foreign Sourced Income) schedule or does she not need to as it is earned in the US?

-V Ravi Subramanian

Taxability of income depends on the residential status of the individual in India, which in turn depends upon the physical stay during the relevant financial year and a previous few tax years. The taxability of the RA stipend in India shall depend upon the residential status of your daughter.

As stated by you, since your daughter qualifies as an NRI, as per the provisions of the Income Tax Act, 1961, only incomes earned/received in India shall be taxable in India. In such a case, the RA stipend shall not be taxable in India. As per the tax return forms for FY 2017-18, in case your daughter has taxable Indian incomes exceeding ₹2.5 lakh, she will be required to file her tax return in Form ITR 2. However, the RA stipend income shall not be required to be reported in theFSI schedule.

However, in case your daughter qualifies as a Resident and Ordinarily Resident in India as per the provisions of the I-T Act, her global incomes are required to be taxed in India. In such a case, the RA stipend shall be taxable and reported in the FSI schedule of ITR 2. However, she will be eligible to claim benefits under the Double Taxation Avoidance Agreement between India and the US (as may be applicable) to mitigate the impact of double taxation.

The author is a practising Chartered Accountant. Send your queries to taxtalk@thehindu.co.in

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