Savings account

Is the interest earned on post office savings account exempt from income tax?

Saurav Majumdar, Calcutta

In June last year, the Union finance ministry issued an order, S..1296(E) F.No.173/13/2011ITA, wherein it noted that savings account maintained with post offices will not give you interest income exemption. The government has capped the tax-free interest on savings account with post offices. Individual accounts will get tax-free interest up to Rs 3,500, while for joint accounts the cap is Rs 7,000.

Shall I have to pay income tax on the money received as commutation of pension?

Sushil Pal, Howrah

The commuted value of pension is exempt from income tax under Section 10(10A) of the I-T Act. This is applicable for employees of central or state governments and local authorities. For pension received from any other employer under any other scheme and the employee also getting gratuity, the maximum exemption allowed is 33 per cent. If the employee is not getting gratuity, 50 per cent of the commuted value of pension will be exempt. The full amount of the commuted value of pension is exempt from tax if it is given by a fund set up by LIC under a pension scheme.

I had transferred some shares from my demat account to my wife's demat account. But I have not prepared any gift deed. Will it attract any tax?

Pradip Chowdhury, Dum Dum

If your wife is a housewife, any income arising out of selling those shares will be clubbed with your income and the liability to pay tax will be on you. The transfer of shares by your wife will be treated as capital gains. If she sells the shares within one year from the transfer, the gain will be treated as short-term capital gains and will be taxed at the rate of 15 per cent. But there will be no tax liability on you if those shares are sold through a recognised stock exchange one year after the transfer to your wife's demat account.

If you have any queries about investing or taxes or a high-cost purchase you are planning, mail to: btgraph@abpmail.com, or write to: Business Telegraph, 6 Prafulla Sarkar Street, Calcutta 700 001.