I am one of the founder members of a charitable trust. The
trust gave a loan of Rs. 10 lakh to my wife at the rate of 6% per annum. Is there an
exemption available to the trust under Section 11 of the Income-tax Act, 1961? —
No exemption is available to the trust under Section 11 of
I-T Act. Exemption under Section 11 in case of assessee claiming to be charitable
institutions defines charitable purpose as providing relief to the poor, education,
medical relief, etc. An entity with a charitable object of the above nature is eligible
for exemption from tax under Section 11 of I-T Act. Providing loan and earning interest on
it doesn’t seem to be a charitable activity and therefore this income would be
considered as non-charitable and liable to tax as per the Act. However, interest income
generated incidentally due to charitable activities of trust are deemed to be charitable
income and are exempt subject to fulfillment of other conditions.
What is the treatment of entertainment allowance?
In case of entertainment allowance, an assessee will not
get any exemption but will be eligible for deduction under Section 16(ii) from gross
salary. This deduction is only allowed to government employees. Non-government employees
will not be eligible for this deduction. The entire amount of entertainment allowance will
be added to gross salary. The minimum of the following will be available as deduction in
case of government employees: (i) Actual amount of entertainment allowance received during
the year; (ii) 20% of his salary; (iii) Rs. 5,000.
Will: Distribution of assets
My brother, who passed away recently, had a joint
demat account with his late younger brother's daughter. In his Will, my brother mentioned
that "any securities held by me jointly with another or others, with my name being
the first... should be included in the valuation of my total property". Please let me
know how his joint demat account should be handled. Also, the tax liability for both the
beneficiaries and the other joint holder of the account. My brother was unmarried and the
beneficiaries are his other nieces and nephews and not the joint account holder. I stay in
USA and I am the administrator of his Will. I want that his assets should be distributed
in an unbiased way as he has mentioned in his Will. — Name withheld on
In property related matters, it is always advisable that
one should seek professional advice from a person in whom the legal heir / administrator
has confidence. It is necessary to take a holistic view of the entire issue before
offering any advise. Hence, in this case also our view is that the administrator should
talk to a lawyer of his / her confidence and seek a comprehensive advice. However, with
regard to your concern. As there is a Will, the inheritance will be decided accordingly.
If the joint demat account holder agrees with the Will, then there is no issue. However,
if a person refuses to accept the Will or the joint demat holder refuses to give any share
to the other beneficiaries, in such a case the administrator will have to approach the
court and obtain a letter of succession / letters of administration for administering the
property. Once the court passes an order all the persons have to adhere to the court
order. He will have to engage the services of an advocate to handle the court related
procedures. At present, there is no inheritance tax in India. Therefore, there is no tax
liability upon the transfer of the shares. Please keep in mind that the above reply is
broadly answered tailored to your situation. Once again, we would say the administrator
should seek professional help from a lawyer in whom he / she has confidence.
Basket trading system
What is basket trading system in India?
In basket trading system, investors through
the member-brokers of the stock exchanges are able to buy or sell all the stocks of
respective indices (BSE Sensex or Nifty) at one time in proportion of their respective
weights in the index. For instance: Investors through the member-brokers of the BSE
(Bombay Stock Exchange) are able to buy or sell all 30 stocks of Sensex at one time in
proportion of their respective weights in the Sensex. The investors can also create their
own baskets by deleting certain scrips in the Sensex.
What does trading volume mean in stock
Trading volume is the sum of buying and
selling of securities in the market. The trading volume is built on rising prices. It is
also linked with falling prices. Trading volume represents bullish and bearish trend.
Banking: Base rate
What does base rate mean?
Base rate is the minimum interest rate
below which banks do not lend.
Tax deducted at source
What is TDS and why is it deducted?
TDS stands for tax deducted at source,
which literally means the tax required to be paid by the assessee, is deducted by the
person paying the income to him. Thus, the tax is deducted at the source of income itself.
However, not whole of the tax is deducted at source, but only a certain part is deducted.
In some cases it may also get excess while in other cases it may be less then the total
tax liability. However, in case of salary the total tax liability can be deducted at
source itself. The intention behind TDS is fast collection of tax and to avoid tax
evasion, by concealing income.
Debenture redemption reserve
What does debenture redemption reserve
Section 117C of the Companies Act, 1956,
was introduced in 2000 as a measure to protect the interest of debenture-holders. It
requires every company which has issued debentures to create a Debenture Redemption
Reserve (DRR). As per this section, a company shall credit adequate amounts to DRR from
its profits every year until such debentures are redeemed. The amounts credited to the DRR
shall not be utilised by the company except for the redemption of debentures.
Can a retail investor also bid in a
Yes. A retail investor can bid in a
book-built issue for a value not more than Rs. 1 lakh. Any bid made in excess of this will
be considered in the HNI (high networth individual) category.
Can a retail investor change his bid?
Yes. The investor can change or revise the
quantity or price in the bid using the form for changing/revising the bid that is
available along with the application form. However, the entire process of changing or
revising the bids should be completed within the date of closure of the issue.
What is a 'self regulatory
organisation'? What are its functions and obligations?
organisation (SRO) means an organisation of intermediaries which represents a particular
segment of securities market and which is duly recognised by SEBI (Securities and Exchange
Board of India) but excludes a stock exchange. An SRO is responsible for investor
protection and education of investors and ensures observance of securities laws by its
members. The members of SRO have to follow a standard code of conduct. An SRO conducts
inspection and audit of its members on regular basis through independent auditors. An SRO
must work in utmost good faith and must comply with the norms of corporate governance as
applicable to listed companies.
What is ISIN number?
securities identification number) is a unique 12 digit alpha-numeric identification number
allotted to each security (For example: INE383C01018). Fully paid-up equity shares, partly
paid-up shares, equity with differential voting / dividend rights issued by the same
issuer will have different ISINs. The details of ISIN number of securities are available
on the website of National Securities Depository Ltd and Central Depository Services
What are secured
Secured debentures are
long-term investment vehicles where companies essentially borrow capital from investors.
The company (issuer) of the debenture usually agrees to pay back the investor interest
until the completion of the debenture agreement, at which point the principal is also
repaid. One main advantage of secured debentures over other types of debentures is that
they allow the investor a bit more protection. Should the issuer default on the repayment,
the debenture holder can make a claim on the assets of the issuer until repayment is
Debenture at discount
What does issue of
debenture at discount mean?
If the debentures are
issued at a price lower than their face value, then the debentures are issued at a
discount. The difference between the face value and the issue price is the discount.
NCD: Interest payment
What are the interest
payment option under non-convertible debentures (NCDs)?
NCDs are available with
various options for interest payout with annual and cumulative payout being the most
common options. The cumulative option is most rewarding since the interest is reinvested
and investors can benefit from compounding. The payout option is suitable for investors
who prefer to receive regular income.
Debenture: Voting rights
Do debenture holders have
voting rights at a general meeting of the company like shareholders?
Debenture holders do not
have voting rights. Section 117 of the Companies Act prohibits the issue of debentures
carrying any kind of voting rights at the general meeting of the company.
TDS on immovable property
Who deducts TDS (tax deducted from source)
on immovable property? - Bharat Sharma
According to Section 194-I of the
Income-tax Act, the responsibility of deducting TDS on immovable property—other than
agricultural land—lies on the buyer. For instance, if Mr. A buys a property worth Rs.
50 lakh from Mr. B, then Mr. A will have to deduct tax at 1% i.e. Rs. 50,000 on sale value
and deposit it with the government. Besides making the payment, Mr. A will also have
to obtain a challan for the payment and issue Form
16B to the seller.Form No. 16B is the certificate under Section 203 of the Income-tax Act, 1961 for
tax deducted at source. As the buyer is responsible for tax deduction, the
buyer is also responsible to give the certificate of TDS in Form 16B to the seller. CBDT (Central Board of Direct Taxes) clarifies
that Form 16B should be given to the seller within 15 days
from the due date of submission of the challan. This is to enable the seller of the house
to claim credit for such TDS against his / her tax liability.
Current A/c vs Capital A/c
What is the difference between current account
and capital account?
The two basic components of balance of payments is the
capital account and current account. The current account reflects a nation's net income,
while the capital account reflects net change in national ownership of assets. Capital
account gives a summary of the capital expenditure and income for a country. The capital
expenditure and income is tracked by way of funds in the form of investments and loans
flowing in and out of an economy. This account comprises foreign direct investments,
portfolio investments, etc. It gives a summary of the net flow of both private and public
investment into an economy. In the current account, goods, services, income and current
transfers are recorded. Current account records a nation's exports and imports of goods
and services and transfer payments. The balance of the current account tells us if a
country has a deficit or a surplus.
Investor Education and Protection Fund
What is Investor Education and Protection Fund?
The Investor Education and Protection Fund (IEPF) has been
established under Section 205C of the Companies Act, 1956 for promotion of investors’
awareness and protection of the interests of investors. Amounts such as unpaid dividend of
companies, matured deposits or debentures with companies, donations given to the Fund etc
are credited to IEPF. The Fund is used for promoting financial educational
activities—including seminars, training, research and publications—aimed at
investors. The IEPF also aids investors’ associations recognised by SEBI (Securities
and Exchange Board of India) to undertake legal proceedings in the interest of investors
in stock market. Salary, allowances and other expenses of office of Ombudsman among
Sweat equity shares
What does sweat equity shares mean?
The term "sweat equity" indicates
equity issued to directors and long time employees who have work hard from
the inception of the company to build it with a brand image and thus contributed
significantly by their efforts in this direction. Sweat equity shares can be issued by the
company to employees or directors at a discount or for consideration other than cash, for
providing know-how or making available rights in the nature of intellectual property
rights or value additions, by whatever name called.
SEBI: Consent orders
What does consent orders mean?
Consent order means an order that settles
administrative or civil proceedings between SEBI (Securities Exchange Board of India) and
a person (Party) who may be found to have violated securities laws. A consent order may or
may not include a determination that a violation has occurred. The main objective of the
consent orders is to reduce the long drawn and expensive legal process of individuals
Please inform me the present bank rate, repo rate, reverse
repo rate, CRR (cash reserve ratio) and SLR (statutory liquidity ratio)? —
According to RBI's (Reserve Bank of India) Q1 Monetary Policy 2013-14, bank rate is 10.25%, repo rate is
7.25%, reverse repo rate is 6.25%, CRR is 4% and SLR rate is 23%.
My establishment discontinued deduction towards
contribution of provident fund (PF) from the employees' salary and also stopped remitting
the contribution of the employer's share to the PF when the number of the employees rolled
down to 15 from 25. Is the establishment allowed to do so? — Jayesh
No, the provisions of Employees' Provident Funds and
Miscellaneous Act, 1952 will not cease to be applicable to the establishment merely on the
ground that the number of employees has reduced to 15. Though the applicability of the Act
takes place on 20 employees yet if the number falls below, even then the Act remains
PF for part-time employees
I have been employed by my company as a part-time
accountant. My company has more than 20 employees. Can I be covered under provisions of
the Employees' Provident Fund scheme? — Gita Thakur
According to Section 2(f) of the of the Employees'
Provident Funds and Miscellaneous Act, 1952, the term 'employee' also includes a part-time
employee. Thus, your company should cover you under the provisions of the Employees'
What is whaling?
Whaling is a sneaky attempt by fraudsters
to hijack the personal computers of top-ranking business executives. In the case of
whaling, fraudsters target an organisation and send personalised emails to either a group
of employees, an executive officer or senior manager. Emails refer to fake but critical
business matters, such as a legal subpoenas or customer complaints. Fraudsters attempt to
lure executives to reveal sensitive details about their business or click on a link in an
email that will secretly download malicious software onto their computer. Criminals could
then attempt to defraud the company using the information they quietly gather.
Human life value
What does human life value (HLV) mean? Is
it important to calculate HLV while buying life insurance policies? — Aarti
Human life value is an estimate of the
financial value of human life. In insurance, this value is used to determine the amount of
insurance that a person should buy. Thus, sum assured must be equal to HLV.
The most common method to calculate HLV is
to estimate your income each year until you expect to retire. For instance, 60 years. This
income stream then needs to be discounted for inflation and expressed in current terms.
My father passed away recently. However, I
am unable to find his life insurance documents. Can I seek the help of the insurer to find
his policy details and file the claim? — Kamal Soni
You need to find at least some proof of the
life insurance policy such as your father's bank statements showing premium payments. If
your father had bought insurance through an agent or a bank, then they may have some
In case you are unable to find a document,
then you need to write to the insurance company with your father's name, date of birth,
death certificate and proof of identity. You would have to produce more documents as the
insurer will ask details of proof of legal representation so that the information can be
shared with you. If you follow through on the paperwork, they will pull out the
information from their records and share it with you.
Loan against EPF
I am working in a public limited company. I
want to know the process to avail loan against my EPF (Employees' Provident Fund). Please
guide. — Vikas Rao
Advance against EPF is sanctioned only
for buying / reconstruction a house, marriage, medical treatment and education of
children. For purchase of a house, one needs to have minimum five years of PF membership,
while for marriage, medical treatment and education, at least seven years of PF membership
is required. You also need to fill in the Application Form 31 which is for advance against
To avail loan
against EPF for purchase of a house, documents such as flat allotment letter, possession
memo, construction completion certificate, PAN card and a cancelled cheque are required.
Besides Application Form 31, you also need to submit Declaration Form for purchase /
reconstruction of a house. You also need to speak to the HR department of your company.
Bank FD: Senior citizen
My mother is 59 years old and wants to open
a fixed deposit for five years with a well-reputed private bank. The bank says she will
get 9.5% interest annually. My mother would be 60 years old after six months hence I
requested the bank to give her the benefit of additional interest rate of 0.5% which is
available for senior citizens. Can my mother get 10% per annum interest rate instead of
9.5% now? — Ramesh Yadav
According to the bank and Income Tax Act,
only those who are 60 years old and above are considered as senior citizens. Since your
mother's age is 59 years, she won't be able to get the interest rate which is available
for the senior citizen currently. Your mother can surely get the benefit of additional
interest rate of 0.5% when she completes 60 years. However, these will not be offered now.
I am starting a cafe in Bandra, Mumbai. The
cafe will be set up in the non-air conditionedarea of a gymkhana, while
the AC area of the gymkhana does not cater any food or liquor services. The only
products prepared in-house will be coffee, tea, juices and smoothies,
whereas rest everything will outsourced. We don't have any kitchen or chimney; only
electrical appliances like microwave, griller and blenders for juices and smoothies. Do I
need to pay service tax and VAT? — Ashish Janiani
If there is
no AC installed in the cafe area, then service tax won't be applicable. VAT
(value added tax) may be applicable. You may check the details, tax rates and exemptions
of VAT from the Department Of Sales Tax-Govt.
of Maharashtra website.
However, if the cafe has centralised AC, then service tax is applicable.
Hence, you need to ensure that no area of the cafe is covered by the AC.
Registration of business
I have heard that if it is a sole proprietorship, then the
business is not required to be registered. Is it correct? Can I rent a space in a
corporate canteen or a mall without registration of the business as long as I have
acquired the required licenses. — Mahima Purohit
Besides having the required licenses, you also need to
register your business under Stops and Establishment Act. Under this Act, registration of
shop / establishment is necessary within 30 days of commencement of work.
Value added tax
Is a restaurant liable to charge VAT and how much percent?
VAT (value added tax) is a sales tax collected by the
government of the state in which the final consumer is located. VAT is levied on the
sale of any item. As food is being sold in a restaurant, VAT is liable to be paid on such
sale. VAT is levied by the state government and is at the sole discretion of the state
government. Different states prescribe different rates of VAT. Moreover, even in the same
state, different rates of VAT have been prescribed for different items. The rate of VAT is
different for alcoholic beverages and varies for other food items.
I had held shares of a private company since 2004. Now I
plan to sell my stake to one of the directors. What will be the capital gain? Will I have
to pay any other tax? — Kalpana Agarwal
The sale will result in long-term capital gains, which will
be taxed at 20.6% subject to indexation benefit.
Securities Appellate Tribunal
What is Securities Appellate Tribunal? Is
it useful for investors?
Securities Appellate Tribunal (SAT) is an
appellate tribunal where an appeal can be filed by an aggrieved person or a listed company
against an order passed by SEBI (Securities and Exchange Board of India) or any stock
exchange in India.
SAT is a legal body established under
Section 15K of the Securities and Exchange Board of India Act, 1992. SAT hears and
disposes of appeals against orders passed by SEBI. Any person aggrieved by an order of
SEBI may prefer an appeal to SAT. There is the prescribed fees payable while filing an
appeal. SAT is certainly useful to investors as it is a forum of redressal at the
appellate level. The purpose of SAT is to protect the interests of investors in the stock
market and to promote the development of, and to regulate, the securities market.
A listed company or an aggrieved investor
may file an appeal before the SAT against the decision of the stock exchange delisting the
securities within 15 days from the date of the decision of the stock exchange delisting
the securities. The final decision vests with the Presiding Officer who is the Head of
I am starting a small business of providing
meal to offices. Do I need to pay service tax? — Mahima Purohit
Service tax exemption has been provided to
small scale service provider whose gross turnover is less than Rs. 10 lakh in a financial
year. If the aggregate value of taxable services provided by you is less than Rs. 10 lakh,
then you need not charge service tax to the customers.
If I prepare meals at home and deliver
these to offices, do I have to charge service tax to my customers? — Mahima Purohit
According to service tax rules, this
service comes under the category of outdoor catering and is liable to service tax
(12.36%). However, your gross turnover should exceed Rs. 10 lakh in a financial year.
Please note, you can charge service tax only on the 40% of the total amount of the food.
You also need to register your business.
If I rent a space in a corporate canteen
and prepare and sell meals to the customers, do I charge service tax? What are the other
taxes besides service tax? — Mahima Purohit
This situation is different from the above
two cases. Renting a corporate canteen comes under "Restaurant Services". Here a
customer comes and buys / orders the food and eats it in the canteen premises. Hence this
is not an outdoor catering service. According to the Finance Act 2013, restaurant service
is taxable under service tax only when there is an air conditioner installed in any area
of the restaurant. Service tax is applicable @ 12.36%. But on the 60% of total amount of
the food. In addition to service tax, these services also attract VAT (value added tax).
Interest earned on NSC
Is the interest earned on the NSC (National Savings
Certificate) taxable and liable for TDS (tax deducted at source)? — Sushant
Interest on NSC is liable for tax as per the Income Tax
Act. However, no tax is deducted at source. Though the interest on NSC is taxable, this
interest in not paid to the account holder but reinvested in NSC. As the interest is
reinvested in NSC—a specified instrument under Section 80C—the taxpayer can
claim interest income up to Rs. 1 lakh as a tax deduction under Section 80C. The interest
earned on NSC on a yearly basis is added to the total income under the head ‘Income
from other sources'.
Income from lottery
I won a lottery and received Rs. 27,640 as prize after TDS.
I spent Rs. 10,000 to buy lottery tickets and won the prize for only one ticket. Can I
claim deduction of Rs. 10,000 (money spent to buy tickets) from the prize which I have
received from one ticket? — Vijay Mane
Income from lotteries, puzzles, games and horse
races and card games is taxable at a special tax rate of 30% under Section
115BB. This income is added under the head, 'Income from other
sources'. According to Income Tax Act, no expense can be deducted under this
category. Thus, expenses incurred on purchase of tickets cannot be claimed.
Loan taken from friend
I had borrowed money from my friend as loan to buy a house in Mumbai. I pay a certain amount of interest to my friend each month. Can I claim tax exemption on the interest amount paid while filing my income tax return? — Vinod Mhatre
Exemption for housing loan interest is provided under Section 24(b) of the Income Tax Act 1961. Section 24(b) does not provide any tax exemption for interest paid to friends or relatives. Hence you will not be able to claim for tax exemption for the interest amount paid to your friend.
What are clip and strip bonds?
Clip and strip bonds split the principal and coupon (interest) portion of a bond issue. Both the principal and regular coupon payments—which have been removed—are sold separately. These bonds is also known as zero-coupon bond. One party will receive the principal at maturity (zero-coupon bond) and the other party will receive the fixed-interest payment over the life of the bond in the form of a stream of coupons. Strip bonds usually trade at a discount and mature to par value or face value. The coupon payments are stripped away and the principal amount of bond is sold as a deep discount bond. The gain to the investor is the difference between the purchase price and the par value. The coupon streams are sold like zero coupon bonds where the investor pays discount for it and receives the payment at a lower rate.
Underwriters vs brokers
What is underwriting and how is an
underwriter different from a broker? - Snehal Godbole
Underwriting means a contract signed
between a company and some financial institutions—called underwriters—to buy the
whole or a portion of the offered shares or debentures of the company that may not be
subscribed for by the public. The underwriters are paid a certain amount of commission to
do this work. Underwriting is an undertaking or guarantee given by the underwriters to the
company that the shares or debentures offered to the public will be subscribed for in
full. If the public response is poor, the underwriters will have to take up the balance of
the shares or debentures not subscribed for by the public and to pay for them. Thus, the
underwriters take over the risk of uncertainty of a public issue of shares or debentures
of a company. On the other hand, brokers just try to get subscriptions to the shares or
debentures issued; they do not take any responsibility of subscribing to the shares or
debentures of the company. In exchange of their service, brokers get the commission also
known as brokerage.
What is a carrot and stick bond? — Geeta Thakur
The returns of a carrot and stick bond is
based on the carrot and stick strategy. According to the strategy, if the bondholder
remains with the issuer / company till the maturity of the bond, then he would be rewarded
high returns. However, if the bondholder sells his bonds before the tenure of the bond, he
would be penalised. This structure combines both rewards and punishments and it is up to
the bondholder to go either hold the bond till the end of the tenure or sell it depending
on his requirement. The bond is named in reference to a cart driver dangling a carrot in
front of a mule and holding a stick behind it. The mule would move towards the carrot
because it wants the reward of food, while also moving away from the stick behind it,
since it does not want the punishment of pain, thus drawing the cart. - See more at:
What are preference shares and how are they
different from ordinary equity shares?
Preference shares are shares in a company
which give their holders an entitlement to a fixed dividend but which do not usually carry
voting rights. The dividend on ordinary shares is uncertain and variable (high when the
company does well, poor or non-existent when it does badly). Preference shareholders get a
fixed dividend which, if not paid, usually accrues until it can be. Each ordinary share
usually carries a vote. Preference shares do not usually carry a vote unless dividends
fall into arrears. In the event of a winding up, preference shares are usually repayable
at par value, and rank above the claims of ordinary shareholders (but behind bank and
Rent in arrears
I used to file my return of income showing
income from rent on receipt basis and was assessed accordingly up to the assessment year
2013-14. During FY2012-13, I received Rs. 1 lakh by way of enhancement for the last six
years as the government department (tenant) enhanced the rate of rent with retrospective
effect. Will the sum of Rs. 1 lakh be taxable in AY13-14? Can it be spread over the last
six years? Is there any provision of tax relief in such cases, like Section 89(1) of the
IT 1961? What are the provisions of the Act governing such cases? — Komal
Section 89(1) specifically refers to salary
arrears and is not applicable in case of arrears of rent. In income tax, previous
year is the concerned financial year in which income is received by you. Since you have
been filing income on receipt basis, you must include arrears rent in the year in which it
is received. There is no other option. This income cannot be spread in past six years
income. Returns for the past years have been processed and the time limit of revising
return has also passed, so no reason to consider revising past return.
I may be hospitalised for surgery soon.
What is the process for cashless payment? How can I ensure that my claim is settled
soon? — Kavita Rao
Don’t depend on the hospital's TPA
(third-party administrator) staff, as many times the TPA is not
aware whether the insurance tie-up is there or discontinued. Send an email
or call the insurer’s customer care before getting admitted. When you go to the
hospital ensure that you have the doctor’s notes prescribing surgery and your photo
identification. Hand these documents to the TPA or insurance desk at the hospital and they
will coordinate with the insurer for approval.
If you want your claim to be settled soon,
you have to be in regular touch with the TPA and insurer. Many times, the insurer or
hospital will ask you to pay the bill and claim a reimbursement from the insurer later.
Avoid that if possible.
I own a small convenience store. What are
the advantages of buying the shopkeeper's insurance? — Nirav Shah
Shopkeeper's policy is a package policy
specially designed for small shopkeepers. It is a single policy combining the various
insurance requirements of shopkeepers. Two major risks are always covered: Damage to the
shop structure and contents due to fire, earthquake, flooding damage and burglary. You can
also insure your shop from theft of money, damage to the shop's signboard, theft by your
staff or injury to third parties on your premises. Many general insurers offer this
policy. You can check the premium rates and the scope of the policy on their websites. You
may select the risks and sum insured most applicable to you and procure the insurance from
the insurer’s branch.
Inter-settlement / beneficiary charge
What is an inter-settlement / beneficiary
charge? - Name withheld on request
Inter-settlement / beneficiary charge is
your demat account transaction charge. If you sell the shares before they are credited to
your demat account, then an inter-settlement charge will be debited to your account. All
transactions done in a month will be billed in the following month. Some brokering firms
levy inter-settlement / beneficiary charge. You may check the same in the fine print of
your account opening form.
I bought a flat in 1990, which I want to
gift to my son and register it in his name. The price of the flat has increased from Rs. 4
lakh to Rs. 50 lakh now. How much tax will I have to pay for this transaction? — Kiran
Gift tax is not applicable either to you or
your son on the proposed gift. You may execute a gift deed to transfer your house to your
son. However, you may have to pay stamp duty to the state government regarding the gift.
Can I use my company secretary (CS)
registration fee receipt to claim tax exemption? Under which section can I apply for the
same? — Chitra Gupta
If you are a salaried employee and receive
professional or education allowance, you may be able to claim tax exemption under Section
10(14) of Income-Tax Act for payment of your CS fee. According to Section 10(14)(i),
academic, research or training allowance granted in educational or research institutions
are exempted from tax. You also need to speak to the HR department of your company.
Regular income and retirement planning
My husband passed away last month and I
received Rs. 22 lakh as sum assured from his insurance policy. I am a housewife with two
kids. My eldest daughter is 14 years while my son is 10 years. I want to invest in a
financial product — which will provide me with a regular source of income — to
meet my daily household expenses and requirements of my children. I also wish to save some
money to fund my retirement goal, so as to receive regular annuity after 15 years. Please
guide. — Name withheld on request
The mail doesn’t provide details such
as your present investments, other sources of income, monthly expenses, and liabilities
(if any). But based on the details provided and given the current inflation rate, the
amount may not last beyond five to seven years.
Assuming you have only Rs. 22 lakh as
capital, we would suggest you stay away from stocks, real estate, gold, and mutual funds.
At this stage, capital protection is the key. So, invest a certain sum in bank fixed
deposits with a mix of different tenures — three years, five years and 10 years
— for regular income.
If you decide to choose this option, do
remember to fill Form 15G every year, if your age is below 60 years, so that tax is not
deducted from your fixed deposits. Since the rates of interest offered by banks differ,
you will need to personally visit the banks near your area to find out the current rate.
Since both nationalised and private banks are regulated by the Reserve Bank, there should
not be a problem with regard to the safety of your principal. However, given the poor
financial state of some co-operative banks, we would suggest you to avoid unless you can
determine their financial strength.
To fund your retirement goal, you may
invest a one-time investment in a pension plan, which provides a death cover during the
deferment period and offers annuity on survival to the date of vesting. Vesting is the
date from which benefits start accruing.
I got married last month. By religion, I am
a Muslim and currently reside in Thane. How should I register my marriage? — Riyaz
You may register your marriage under the
Muslim Law. For this, you need to approach the Sub-Registrar office in Thane district.
According to the Law, an application is to be made in the prescribed form duly signed by
both the husband and wife.
Residential proof of both the bride and
bridegroom should be attached along with the application. For age proof, an attested copy
of the school leaving certificate, passport, birth certificate or PAN card will suffice.
For proof of marriage, you are required to submit Nikah Nama. A separate passport sized
photograph of the bride and bridegroom also needs to be included. The bride and bridegroom
have to appear in front of the marriage officer along with three witnesses.
You can also approach the Sub-Registrar
office for any help with regard to the procedure or documents /forms to be submitted.
Taxation: Section 24(B)
I bought a house five years ago which I am
planning to sell this year. In the cost of acquisition, can I mention expenses such as
water and electrical connection charges? — Kiran Patil
Yes, you can mention all such one-time
charges in the cost of acquisition. The other expenses—which you can add in the cost
of acquisition—include lawyer’s fee, brokerage charges, travelling expenses,
processing fees, and the interest paid on loan taken for the purchase of property during
the pre-construction period, if the deduction has not been claimed under Section 24(b).
Section 54 & Section 54 EC
I had bought a house 10 years back. Can I
claim exemption from long-term capital gains by selling my house and reinvesting the sale
proceeds in a new residential flat or in capital gains tax saving bonds? To claim
exemption, should the entire sale proceeds or only the long-term gains be reinvested? —
Section 54 of Income Tax provides for
exemption on long-term capital gains arising on sale of a house on reinvestment in another
house within a stipulated time. Section 54 EC provides exemption on any long-term capital
gains on reinvestment in certain bonds within a stipulated time. The amount of exemption
either under Section 54 or under Section 54 EC, is lower of the amount of long-term
capital gains and amount reinvested in the stipulated period.
I had bought health insurance in 2011 and
have been paying the policy premiums regularly without making any claim. However, this
year my renewal premium was five times more than the premium I used to pay. I had
approached the Grievance Redressal Officer of my insurer asking the reason for hike in the
premium. However, I have not received any response. Please guide. — Manish
Health Insurance premiums are non-tariff
products. This implies it is not regulated by the Tariff Advisory Committee (TAC). Under
non-tariff regime, an insurer can offer their own premium rates, which are decided on the
basis of their past claim ratios, future expectations of claims, etc. If you are not
satisfied with the hike in the premium, you can switch to some other insurer who is
offering competitive rates.
My mother is 45 years old and recently
underwent a heart surgery. I thought that her mediclaim policy will cover the entire cost
of operation. However, the insurance agent told me that only hospitalisation expenses will
be covered and that too are subject to conditions. Is there any medical policy that covers
all the costs? - Prakruti Roy
A mediclaim or health insurance policy
usually covers hospitalisation expenses for the treatment of an illness or injury,
provided the hospitalisation is for more than 24 hours. The pre-existing diseases are
covered only after a continuous and claim-free renewal for a specified period in the
policy. Sometimes a co-pay or sublimit clause is applicable in the policy for various
treatments and procedures. Also, before buying a mediclaim policy, you need to read the
fine print carefully. Make an analysis of what is covered and what is not covered under
I have taken a housing loan and pay my EMIs
regularly before the payment due date. However, I bought the house in my wife’s name.
Can I avail the tax benefits under Section 80C for the principal and under Section 24B for
interest payments? - Krishna Pandey
You cannot claim tax benefits on a housing
loan if the property is not owned by you. However, if your wife is the owner of property
and you pay the EMI, you can follow the rules of clubbing of income and can be eligible
for claiming tax deduction on the interest paid.
My father passed away one year back, but I
failed to inform his bank about it. He did not have a joint account. How can I close the
account or transfer it in my mother’s name? - Shashikant Mali
The question doesn’t provide any
details about the nomination. You need to submit a letter carrying the necessary
information, along with a copy of death certificate to the bank. If the nomination was not
done, or if it is a single or joint account, banks are required to follow a basic
procedure for repayment to the depositor’s legal heir. The legal heir needs to submit
death certificate of the account holder and proof of legal representation. You should also
approach the bank, in which your father had his account, to help you with regard to the
procedure and documents /forms to be submitted.
Online term plans
I have already bought a term insurance plan
worth Rs. 20 lakh from an agent. But now he has changed his profession and doesn’t
provide insurance service. Will this affect my policy? I also want to buy a term plan
worth Rs. 50 lakh. Is it better to buy term plan online or through an agent? -
If your agent has changed his profession
and is no longer providing you the service, that doesn’t affect your insurance
policy. You can avail the service directly from the insurance company. Buying an online
term plan is a good and safe option. You can purchase a term plan 24x7, 365 days a year.
This could be from your office or home. You can also seek help of customer care
representatives of insurers through online chat / 24x7 toll-free calling facility to
resolve your doubts. Purchasing a life insurance online is usually cost-effective since
companies pass on the savings from distribution, administration and courier expenses to
Access to operate locker
My parents passed away recently and since I
am their only child, how can I get legal approval to operate their bank locker? - Kishore
The question doesn’t provide any
details about the nomination. According to RBI guidelines, if all joint locker holders die
and the nomination is done, the nominee can access the locker. The nominee has to submit a
death certificate of the account holders along with an identity proof of the nominee. In
case the nomination is not done, access to the locker can be given jointly to legal heirs
of all the deceased account holders. The legal heirs need to submit death certificate of
the account holders and proof of legal representation. You should also approach your bank
to help you resolve the issue.
My mother has earned an interest of Rs. 1
lakh from her bank fixed deposits. She is a housewife and has no other source of income.
Is the interest amount taxable? - Dinesh Saney
The basic exemption limit from taxation for
individuals (both men and women below 60 years to age) for FY12-13 is Rs. 2 lakh. Your
mother can submit Form 15H to the bank, which will stop deducting tax on the interest
income. If the bank has already deducted tax, she can file her income tax return and claim
it as refund.
What is DRCA?
My Axis Bank savings account statement
showed an amount of Rs. 112.36 debited from my account as DRCA. May I request you to
please let me know what is DRCA and why this money is debited to my account? - Bhagwanti
Assuming that you would be holding an
international debit card, an amount of Rs. 112.36 would have been debited from your card
towards debit card annual charges according to the card type. DRCA basically stand for
debit card annual charges. In banking term, DR is usually an abbreviation used for debit.
DRCA is charged once every year to your savings bank account by the banks if you owe a
debit card. The Rs. 100 would be the debit card fees per annum, while Rs. 12.36 would
refer to the service tax.
Who qualifies as a non-resident Indian
According to the Income Tax Act, an
individual is considered to be a resident of India if he meets either of these
conditions—he should be present in India physically for 182 days or more in a tax
year (April 1 to March 31), or for 60 days in the previous year and 365 days or more in
the preceding four tax years. If the individual doesn’t meet any of the above two
conditions, then he is deemed to be an NRI.
Can an NRI open account without having to
come to the branch in India?
Yes. An NRI can open an account with any
Bank branch in India without having to come to the branch in India. The type of accounts
available to an NRI are: Non-resident external (NRE), non-resident ordinary (NRO) and
foreign currency non-resident (FCNR)
What is MCX-SX40?
Multi Commodity Exchange of India (MCX) has
started its live trading in equities and equity derivatives from 11th February.
MCX-SX is India’s third full-fledged equity bourse after the Bombay Stock Exchange
(BSE) and the National Stock Exchange. BSE is over 132 years old, while NSE is almost 20
With the launch of SX40, India now has
three national stock exchanges—BSE, NSE and MCX-SX. The MCX-SX benchmark
index—called SX40—is similar to BSE’s Sensex and NSE’s
Nifty. There are 1,116 companies currently listed on MCX-SX, compared to 1,665 firms
on NSE and 5,191 companies on BSE.
What is the base value for SX-40?
The base value will be 10,000 with a base
date of March 31, 2010. A free float based index of 40 large cap—liquid stocks
representing diversified sectors of the economy. The term free float refers to shares that
are readily available for trading. The index allows fast entry for companies with
better free float, market cap and liquidity. SX40 includes companies that have a minimum
free float of 10% and must have a positive net-worth. MCX-SX has taken stocks from 100
liquid companies for its SX40.
What is the objective of SX-40?
SX40 is designed to measure the economic
performance with better representation of various industries and sectors. The Index is
devised to offer support for investment products such as index futures and option, index
portfolio, exchange traded funds, index funds, etc.
MCX-SX will work with Indian Statistical
Institute, a research organisation, for its indices. SX40 is formed to be a performance
benchmark and to provide for efficient investment and risk management instrument. It would
also help in structuring passive investment vehicles. The stocks in SX40 have an industry
cap at 20% (+/- 2% band). This means stocks from a particular industry cannot have over
20% weightage in the index. There is no industrial cap in the composition of the Nifty.
Which companies constituent SX40?
Constituents of SX40 include ACC, Ambuja
Cements, Asian Paints, Bajaj Auto, BPCL, Bharti Airtel, BHEL, Cairn India, Cipla, Coal
India, Dr Reddy’s, Gail (India), HCL Tech, HDFC Bank, HDFC, Hero MotoCorp, Hindalco,
HUL, ICICI Bank, Infosys, ITC, JP Associates, JSPL, L&T, Lupin, M&M, Maruti
Suzuki, NTPC, ONGC, Power Grid Corp, RIL, Sun Pharma, TCS, Tata Motors, Tata Power, Tata
Steel, Titan Industries, United Spirits, Wipro and Zee Entertainment.
Industry wise weightage: Financials (22%),
consumer goods (18.2%), industrials and oil & gas (both 14.8%), tech (14.2%),
healthcare (5.1%), basic materials (4.7%), utilities (3.1%), telecom (2.4%) and consumer
What is the membership fee?
MCX-SX is offering an entry-level
membership fee and deposit at Rs. 25 lakh to be valid till October 18 and afterwards it
would be raised to Rs. 50 lakh.
Transfer of Shares
What is the fee to be paid for transfer of
physical shares? - Jayantilal Shah
Assuming that you want to transfer
(transferor) physical shares to some other person (transferee), the fee is 0.25% of the
market value of the total shares prevailing on the date of execution of the transfer deed.
Can stamp duty be paid in the form of
stamps affixed or one has to get it franked? - Jayantilal Shah
You can affix share transfer stamps at
0.25% of the market value on the date of execution of the transfer deed. Or you may get
the transfer deed franked. However, it is advisable to pay stamp duty by way of franking
for big amounts for all practical purposes.
Where can one buy the stamps or get the
transfer deed franked? - Jayantilal Shah
Share transfer stamps can be obtained from
the authorised stamp vendors. Your share broker can also help you in this regard. The
share transfer stamps are also available at the Bombay Stock Exchange (BSE) in Mumbai. The
BSE also provides the franking service.
Where are the stamp vendors located? -
A list of licenced stamp vendors is
displayed at General Stamp Office (http://igrmaharashtra.gov.in/); Town Hall Building,
Shahid Bhagatsingh Road, Fort, Mumbai-400001; Phone no: 022-22664585, 22656904.
Are old forms valid? - Jayantilal
A transfer deed is valid for one year from
the date of its presentation as specified thereon.
Stock Market Basics
What is share market? - Krishna
Share market is generally a public market
where stocks, mutual funds, bonds and derivatives are sold. The share market is also
called equity market or secondary market. It is a place where the shares of various
companies are bought and sold. The stock market is an organised platform through which the
buyers and sellers can trade in shares or other forms of securities like bonds,
derivatives, etc. The stock exchanges serve the purpose of listing and trading the shares.
In India, there are two stock exchanges:
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). There are also regional
stock exchanges like Ahmedabad Stock Exchange and Calcutta Stock Exchange among others.
What is Sensex and Nifty? - Krishna
The Sensex is an "index". An
index is basically an indicator. It gives you a general idea about whether most of the
stocks have gone up or most of the stocks have gone down. The Sensex is an indicator
of all the major companies of the BSE.
If the Sensex goes up, it means that the
prices of the stocks of most major companies on the BSE have gone up. If the Sensex goes
down, this tells you that the stock price of most of the major stocks on the BSE have gone
down. The Nifty is an indicator of all the major companies of the NSE. Just like the
Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the
What factors which make the stock price go
up or down? - Krishna Chaitanya
Stock prices change every day because of
market forces. Stock prices usually change because of "supply" and
"demand". If more people want to buy a stock (demand) than sell it (supply),
then the price moves up!On the other hand, if more people wanted to sell a stock than buy
it, there would be greater supply than demand, and the price would fall. Thus supply and
demand in the market determines stock price.
What happens if the beneficiary/nominee of
a life insurance policy dies during the policy term?
A beneficiary/nominee is the receiver of
the proceeds of the policy when the named insured dies. If the beneficiary of a life
insurance policy dies before the insured, then the entire proceeds of life insurance will
go to the insured.
Beneficiaries are typically categorized as
primary and contingent. A primary beneficiary is entitled to the proceeds of the policy
upon the death of the insured, but such rights expire if he or she dies before the
insured. A contingent (secondary) beneficiary is entitled to the policy proceeds if the
primary beneficiary has predeceased the insured. Thus, if the primary beneficiary dies
before the life insured does, then the contingent beneficiary(ies) would become the
primary beneficiary automatically.
Does a beneficiary also enjoy life
insurance policy in the same way as the owner of the policy?
No. A beneficiary is only entitled to
receive the insurance amount after the demise of the insured. A beneficiary does not enjoy
any life insurance as he/she is not a party to the insurance policy contract signed
between the insured and insurer.
How long after an insured dies can
a beneficiary get paid on a life insurance policy?
As long as the policy was in force at the
time of the insured’s death you can place a claim. Simply contact the agent who will
be happy to assist you or contact the claim department directly at the insurance company.
Does a beneficiary own the policy after the
No. A beneficiary does not own the policy.
A beneficiary / nominee will only receive the policy proceeds after the insured person
Request you to guide me on a PF query,
if a person resigns from a company and withdraws his PF. He then wants to rejoin the same
company and continue his PF account after waiting for a mandatory period of two months.
However the PF department says, he has to wait till the financial year closes to become a
PF member again. Is it so then under what section of PF does the following rule
come? Please guide me. – Sengupta
The mail mentions "PF department"
whether it is the official EPF (Employees’ Provident Fund) department or the
‘company’ PF department is not clear. If the employee has resigned from an XYZ
company and wants to rejoin the same XYZ company after completing the mandatory two months
waiting period, then he can send in the request to his HR dept to open a new PF account.
He has to submit the required forms and documents. He would get a new PF number. There is
no need to wait till the financial year closes to become a PF member.
CAS VIA EMAIL
This is with regard to your article,
"Mutual Funds to send CAS via email". When did this start? I absolutely want
postal mails to stop. How can I start receiving soft copies of my MF statements? My one
correct email address is already on file with all my mutual funds. - Sadhu
Consolidated account statement or CAS by email was
introduced around six months back. You may request for a single CAS—across all your
MFs investments—to CAMS or Karvy. You have mentioned, "My one correct email address is already on file with
all my mutual funds." To get the CAS, the same email address that
you had originally registered while opening your account is needed.
If you have registered an email address in
your folios to fund houses serviced by CAMS / Karvy, you can use your email ID to obtain a
consolidated PDF Account Statement at your registered email address.
Please check the
RL: https://www.camsonline.com/invmailback/acctstmtopt.aspx to
set the delivery option. If you have not registered your email ID, you
should send a written and signed instruction to CAMS/Karvy serviced mutual funds.
To stop physical statement: You can call the
respective fund houses’ customer care executives, give your MF folio number and ask
them to stop physical statements. You can also visit the
Fill in the following data: AMC name, Folio no,
your email ID and you would like account statements to be
sent via email. You can also send application to each of the MF house
quoting your folio number, fund name and asking them to switch to email based
statements. Do not forget to mention your email id.
DEMAT NAME CHANGE
In my demat account, my name is mentioned as Rakesh Narain,
instead of Rakesh Narain Sharma. My name in the higher secondary school
certificate of CBSE is Rakesh Narain. During those days (in the year 1956), last name
was not allowed to be written in the school but it was added to the
father’s name in the school. In my PAN card, my name is written
as Rakesh Narain Sharma.
Now, I want to add my last name in
my demat account. My bank account, mentions my full name Rakesh Narain
Sharma. Kindly let me know the procedure to add my full name in the demat account. —
Your last name cannot be added to
your demat account because modifications to the
existing demat accounts are not allowed, according to CDSL (Central
Depository Services (India) Ltd). You have an option to close your
current demat account and open a new demat account (adding your
full name). For further information you may contact CDSL’s operation
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