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Wednesday, February 3, 1999

Senior citizens exempt from professional tax 

A N Shanbhag  
In one of your recent pieces, you have indicated that the professional tax is payable by senior citizens. I wish to draw your attention to the fact that there has been an amendment which is effective from 1.4.95 that exempts persons who have completed the age of 65 years from paying professional tax.-- D K Suvarna, Mumbai

Yes, you are right. I had missed this amendment. After receiving your communique, I studied it and found that the following categories are exempt:

  • Senior citizens. * Members of armed forces, reserve and auxiliary services, defence ordnance factories, etc.

  • Badli workers in textile industries.

  • Persons suffering from permanent physical disability, including blindness (note: mentally retarded persons are not covered!).

  • Parents or guardians of any person suffering from mental retardation or physically disabled person.

  • Women exclusively engaged as agents under the Mahila Pradhan Kshetriya Bachat Yojana of Directorate of Small Savings (note: this covers only thePost Office 5-year Recurring Deposit Account and not PPF, NSC, Time Deposit, Monthly Income Scheme etc.).

    Now, I have two objections:

  • Persons suffering from permanent physical disability, including blindness are exempt. What about mentally retarded persons?

  • In respect of senior citizens, the amendment granting exemption stipulates: The persons who have completed the age of 65 years, provided that such mental retardation shall be duly certified by a registered medical practitioner.

    This implies that anyone who celebrates his 65th birthday becomes mentally retarded from the next day. I am glad that I am not a senior citizen yet, but am apprehensive of becoming one next year. The rates at which the tax is payable in Maharashtra are as follows:

    If the salary per month is less than Rs 2,000, there is no professional tax. If it is between 2,001 and Rs 2,500, the professional tax is Rs 30. If the salary per month is Rs 2,501 to Rs 3,500, the tax is Rs 60. For salary per month between Rs 3,501 andRs 5,000, the professional tax is Rs 90. If it is between Rs 5,001 and Rs 10,000, the tax is Rs 120 and finally if the salary per month is Rs 10,000 and above, the professional tax is Rs 150.

    I purchased a residential flat at Bombay in February 1969 in the name of my wife. The cost of the flat has been entirely borne by me by -- selling off paddy lands which were acquired by me from my father in pursuance of a partition deed and loan from State Co-operative Housing Finance Society.The service and maintenance charges, etc., have been borne by me alone up to date. At the time of purchase in 1969, the cost of the flat was Rs 37,500. I have received an offer of Rs 22 lakh. The nominees for this property are my sons.

  • Can my wife sell the flat on her own without getting the approval of our sons and myself?

  • What is the tax liability consequent to the sale?

  • As the property is acquired by funds inherited, are the proceeds of the sale required to be equally divided amongst all the members of thefamily--myself, my wife and my sons?

  • If so, whether the capital gains would be restricted only to the extent of each member's share?

    --R T Harihar, SecunderabadThe flat was bought in the name of your wife by applying funds from i) a loan taken by you and ii) sale of property inherited by you.

    1) This is a benami transaction. The department will consider this as a flat belonging to you and will charge the income from you.

    2) I wonder how you managed to get a loan from a financial institution in your name when the flat was purchased in the name of your wife. I would like to learn the trick from you.

    3) The income from the property received by you as a partition of your father's HUF is normally ass essed to tax as your individual income. If you form a new HUF along with your wife and sons, then the income from such property is assessed in the hands of the new HUF. It appears that you have not taken any action to create a new HUF. It may be difficult to suddenly declare this as an asset of a newHUF.

    4) A nominee has no right whatsoever either before or after the death of the account holder. At best, he is a trustee of the amount paid to him after the death of the account holder. It is the will of the account holder that supersedes everything else. The holder of the asset, during his life time, can sell the asset without the consent of the nominees. He can go to the extent of appointing new nominees in place of the old ones without the consent from either the old or new nominees.

    5) You have incurred long-term capital gains. It is necessary for you to get this flat assessed as on 1.4.81 from an official chartered valuer. Only then can I compute your exact tax liability and tell you how to save it.Is it advisable to keep the units of US64 or sell them? Can I expect dividend/interest next year?

    --R S Bilimoria, MumbaiUTI raises the sale and repurchase price at the end of each month. These were applicable till the next month. The raise is a dividend equaliser. It enables UTI pay the same dividendto all the unit holders on the registers of UTI at the end of the year, irrespective of the date of purchase. To give additional comfort to persons like you, who might get scared into selling the units, UTI has started to declare the prices for two months in advance. For instance, the prices for February 1999 are known right at this juncture.Normally, these would have been declared on February 1, 1999. Since such a declaration is a contractual obligation, you can afford to wait and watch. Obviously, UTI does intend to pay dividend next July.

    Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.


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