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I am a senior citizen and do not get pension. Can one get both benefits - a) qualify for deduction up ₹50,000 on interest earned from FDs with banks/NBFCs/NCDs/ senior citizen savings scheme/Varishtha Nagrik Bima/Vaya Vandana schemes b) pay no tax on LTCG on equity up to ₹100,000. Besides, how should I apportion tax on LTCG in systematic withdrawal plans (SWP). Also, does pension in ITR 2 covers EPF pension and annuity amount received from LIC's Jeevan Akshay/ Suraksha schemes.
Shrikant Mahajan
As per the provisions of Section 80TTB of Income-tax Act 1961 (‘the Act’), where the gross total income of a resident senior citizen includes income by way of interest on deposits (including interest on fixed deposits) with a bank or a co-operative society engaged in the business of banking or a post office, a deduction shall be allowed on account of such interest not exceeding ₹50,000.
Accordingly, interest income from savings account/fixed deposits from banks, post-offices and cooperative societies are eligible for deduction under Section 80TTB of the Act. In your case, interest income from banks and post-office senior citizen savings scheme shall be eligible for deductions.
However, interest income from NBFCs, NCDs and Pradhan Mantri Vaya Vandana Yojana and Varishtha Nagrik Bima do not fall under the purview of Section 80TTB and, hence, should not be eligible for such deduction. The same should be taxable under the head ‘income from other sources’ as per the applicable slab rates.
As per provisions of Section 112A of the Act, any long-term capital gain on or after April 1, 2018 on sale of an equity share or an equity-oriented mutual fund is exempt from tax up to ₹100,000. Amounts exceeding ₹100,000 shall be taxable @10 per cent (without any indexation for cost inflation). This exemption of ₹100,000 from such LTCG and deduction of ₹50,000 under Section 80TTB are mutually independent of each other.
Under SIP mode of investment in mutual funds, investment is required to be made at regular intervals. For taxation, each SIP is treated as a fresh investment and gains are taxed separately. Withdrawal of funds (either in lumpsum or through the systematic withdrawal plan), shall be treated as long term capital gains (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.
On your query of pension reporting, if the pension relates to an individual’s employment, the same is required to be reported as part of the salary income disclosures/schedule. For other pension, the same should be reported under income from other sources. Accordingly, your pension received from LIC's Jeevan Akshay/Suraksha schemes should be reported under income from other sources (subject to its taxability as per provisions of the Act).
The writer is a practising chartered accountant
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