I am a senior citizen and retired government servant drawing pension. My son who is working in the US plans to remit around $1,000 every month for my personal use. I intend to invest the rupee equivalent in bank fixed deposits . Will this remittance be treated as income in my hand or gift from my son? Will any clubbing provisions apply for him? Will there be any tax liability for me or my son? Should I file my tax return showing the interest on the above FDs as my income along with pension?
P K Sethi
As per the provisions of the Income-Tax Act, 1961, amount received from relatives (which includes son) without any consideration is not chargeable to tax. Once the remitted amount is invested by you in fixed deposits, the interest income earned from the same shall be chargeable to tax in your hands and the clubbing provisions shall not be applicable to your son.
However, where the remittance is made to provide any indirect benefit to your son or his spouse, then the clubbing provisions shall apply and any income generated will be clubbed and taxable in the hands of your son.Further, you would be required to file your tax return in case your taxable income, including interest income, from fixed deposits (that is, after claiming benefit of deductions available under various provisions of the Act), exceeds the maximum amount not chargeable to tax.
For the AY 2011-12, I have somehow missed filing the return of my son. On checking, I find that all taxes have been paid in full. Only the return has not been filed. What are the legal implications of this and how can I rectify this oversight?
D K Ramchandra
As per the provisions of the Income-tax Act, 1961 applicable for FY 2010-11 (AY 2011-12), any person who has not furnished a return of income for a particular FY within the prescribed due-date, may file a belated tax return. The same can be done within one year from the end of relevant AY or before completion of assessment for the said year, whichever is earlier. Accordingly, the return of income for FY 2010-11 (AY 2011-12) may have been filed up to March 32, 2013 or before the completion of assessment for FY 2010-11, whichever is earlier. Hence, as we are beyond the timelines prescribed for filing a belated return of income, you cannot file return of income now. In case the tax authorities issue any notice for furnishing the return of income, you may file the same before the tax officer in response .
Further, the Act provides for levy of interest, penalty and prosecution proceedings for non-compliance in filing of return. In relation to the levy of interest, as you have already deposited the necessary tax (along with interest, if any),there cannot be any levy of interest as per the provisions of the Act. Additionally, before levying a penalty and/or launching prosecution proceedings, an opportunity of being heard is provided to the taxpayer. If the tax officer is satisfied that no tax has been sought to be evaded, such proceedings may be dropped.
The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in