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I retired from a PSU in May 2018 on reaching 60 years of age. I seek the following clarifications.
1. I had invested in the Jeevan Suraksha scheme of LIC in 2000 for a sum assured of ₹1.8 lakh. The policy was vested in November 2018. I would like to know whether the annuity received can be considered as pension and standard deduction be claimed against the same, as the policy is a pension plan.
2. The said PSU has a superannuation scheme which is contributory by both the employee and company. A trust has been registered for the same. A master policy exists with LIC to which the contributions are transferred at the end of each financial year. On superannuation of the executive, based on the individuals and the company’s contribution in respect of that executive, LIC determines the annuity payable. My query is whether the said annuity qualifies as pension and subject to standard deduction.
3. Is investment in the Prime Minister’s Vaya Vandana Yojana eligible for exemption under Section 80C or relevant sections of the Income Tax Act?
4. Are investments in the post office monthly scheme eligible for exemption under 80C or relevant sections?
Suresh GS
1. I understand that you made a personal investment in the Jeevan Suraksha scheme of the Life Insurance Corporation of India. As the annuity received by you is not part of the retirement benefits received from your employer, the same cannot be considered as income under the head ‘Salary’ and hence, no standard deduction under Section 16(ia) of the Income Tax Act can be claimed from such income. Such annuity income shall be taxable as ‘income from other sources’.
2. As per Section 10(13) of the I-T Act, any payment from an approved superannuation fund will be exempt, provided the payment is made to an employee in lieu of, or in commutation of an annuity on, his/her retirement.
In your case, you are receiving annuity on a periodic basis, which is on account of your employment; such annuity will be taxable as an income under the head ‘Salaries’. You will be eligible to claim a standard deduction of ₹50,000 from such income for FY 2019-20.
3. As per the prescribed investment avenues exempt from tax for FY2018-19 under Section 80C of the I-T Act, contribution made to the Prime Minister’s Vaya Vandana Yojana is not eligible for deduction under Section 80C.
4. As per Section 80C, any investment made as a five-year time deposit with post office savings is eligible for deduction. Investment in Post Office Monthly Income Scheme is not eligible for deduction under Section 80C.
I had purchased 100 shares of DLF through IPO in 2007 at the rate of ₹520. If I sell these shares now, what purchase price will be considered for deciding LTCG/LTCL. Will it be the IPO price as on January 31, 2018 — ₹259.60). Please guide me.
R Uttam Sawant
As per the newly inserted Section 112A under the I-T Act, by Finance Act 2018, long-term capital gains (LTCG) arising from transfer of a long-term capital asset, being equity shares of a company or a unit of an equity-oriented fund or a unit of business trust (subject to STT being paid at specified times) is taxable @ 10 per cent (without giving the benefit of cost inflation index) , where LTCG exceeds ₹1 lakh .
As per Section 55(2) (ac) of the I-T Act, the cost of acquisition for the above-specified long-term capital assets acquired on or before January 31, 2018, will be higher of the below:
i) Original cost of acquisition of such asset;
ii) Lower of the following:
Fair market value (FMV) of such asset as on January 31, 2018; and
The full value of consideration received as a result of the sale/transfer.
In your case, the cost of acquisition should be higher of the following:
i) The original price (being ₹520 per share); or
ii) Lower of the following:
Sale price of the share;
FMV as on January, 2018.
Note: FMV is defined as the highest traded price of the share on NSE and BSE, and should not be compared with the IPO price of ₹259.60.
The writer is a practising chartered accountant.
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