October 20 To October 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 43 u (^43401)
(c) the beneficiaries are relatives dependent
on the person declaring the trust for
support and maintenance; and
(d) it is the only trust declared by the
person.
Therefore, if you can ensure satisfaction of
all the above conditions while executing the
‘will’ the trust will be chargeable to tax at the
individual rate of tax on its income when it
comes into existence post-declarant’s life time.
Deductibility and taxation of
retrenchment compensation
In our company, we have some employees
who have taken voluntary retirement from
PSUs and joined our company 6 years
ago. Due to adoption of sophisticated
technology, we desire to terminate their
services by paying compensation. It is
being negotiated. We would like to know
whether such compensation will be treated
as gratuity for the purpose of exemption
in their personal assessment. Similarly,
can we claim the payment as business
expenditure under section 37?
S
ection 10(10) provides fee exemption in
respect of gratuity received by the employees.
It covers termination of employment also. The
CBDT circular F.No.194/6/73 dated 19-6-1973
says that even resignation is covered for
availing of tax exemption. In case they have
claimed exemption for gratuity when they
took VRS from PSUs and the exemption of
10 lakhs was not availed fully they can utilize the balance amount of exemption. The quantum of exemption is based on the limits as contained in section 10(10). As regards deduction of such payment as expenditure, it is deductible under section 37. By whatever name you may call the amount paid towards termination of employees’ ser- vices, it is deductible as business expenditure. Long-term capital gain and advance tax instalments One of my clients sold a vacant land for 120 lakhs in July, 2018. The capital gain
after deducting indexed cost of acquisition
amounts to 95 lakhs. My client wants to acquire an apartment for 60 lakhs
to get exemption under section 54F and
subscribe to section 54EC bonds for ` 20
lakhs and pay tax on the balance of
capital gain. He wants to deposit the
money in capital gain deposit account
before investing the amounts in residential
apartment and section 54EC bonds. Also,
he wants to pay advance tax on staggered
basis. Is it possible?
I
n this case taxpayer wants to acquire an
apartment and fully satisfies the conditions
mentioned in section 54F. He has time of 2
years for acquisition or 3 years for construction
of new residential house. Till such time,
the amount appropriated could be kept in
capital gain deposit account. For acquisition
of section 54EC bonds, the time limit is only
6 months. He need not part with the money
by putting it in capital gain deposit account.
As the law permits him to hold the funds
meant for section 54EC investments, he can
very well retain it in his bank account. In
case he is particular to deposit in capital gain
deposit he must open two separate accounts,
viz., (i) for acquisition of apartment; and
(ii) for section 54EC bonds respectively. The
Notification No. GSR 724(E) dated 22.06.1988
says that the depositor has to make separate
application for opening accounts under each
of such sections under which exemption is
sought to be claimed.
As regards advance tax liability, an individual
taxpayer must pay not less than 45% of the
total tax liability by 15th of September; 75%
by 15th of December and the balance by
15th of March of the previous year. In this
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(Ron)
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