Tax Column

Jayesh Dadia
Chartered Accountant 

I am an individual earning salary income. During the financial year 2018-19, I received a gift of Rs. 5 lakh from one of the client of my employer. The gesture was on account of my commitment and services to that client and also out of love and affection towards me. Isthe amount of Rs. 5 lakh taxable in my hand as part of my salary income?

Yes, the entire amount of Rs. 5 lakhis taxable in your hand as ‘income from other sources’. The amount is not received from your employer, but it is received from the client of your employer.Therefore, it will not be taxed as salary income. Under section 56(2)(x),any consideration received by individual in excess of Rs. 50,000 from non-relative is taxable as ‘income from other sources’. If you are in the highest tax bracket, then the tax rate is 30%.

I am a professional architect. I have rendered my professional services to one of my clients, who is a builder. In appreciation of my excellent services, the builder has decided to allot me one small flat of 500sq.ft. in lieu of my professional services. I have not raised any billon my client. What would be the tax implication in my hand?

Since you would be receiving the flat without any consideration,the provision of section 56(2)(x) would be invoked. Under this section,the ready reckoner value (for stamp duty purpose) of the flat would be considered as ‘income from other sources’ in your hand. It will not be taxed as professional income and, therefore, you cannot set-off any expenses incurred for rendering professional services.

If you want to treat this income as professional income, then you should better raise professional bill of an equivalent amount, i.e., the ready reckoner value of the flat. In doing so, you may have to pay GST also.

I am an individual. For the financial year 2018-19, I was a resident in India. Prior to that, I was non-resident as I was working in UAE for 10 years. While working in UAE,besides salary, I also earned certain income in the nature of commission, interest, etc. Over the period of 10 years, I accumulated saving out of my income in UAE ofRs 5 crore approx. which I have transferred to my Indian bank account in the FY2018-19.Is the amount of Rs5 crore taxable in India and what paper work is required?

The transfer of Rs. 5 crore from the UAE account to your Indian bank account is not taxable in India, provided you have earned the entire amount while you were in UAE and earned out of India.

Further, if the amount transferred from UAE is routed through proper banking channels, i.e., if the foreign inward remittance certificate is showing you both as the remitter and the beneficiary, then the amount is not taxable.

In addition to above, you can also prepare a summary of your UAE bank accounts with bank statements reflecting all the receipts of your earnings in UAE and which establish that Rs. 5 crore is out of those earnings.

I am an employee with an MNC. During the course of my employment, I met with an accident and was severely injured and was admitted in hospital. The entire medical expenses have been met by my employer.The employer has made some of the payments directly to the hospital, while some of the payments have been made to me as reimbursement of actual medical expenses incurred. Is there any tax implication in my hand on account of my personal expenses incurred by the company?

Reimbursement by the employer of expenditure incurred by an employee on his medical treatment in any hospital which is approved as per criteria laid down by the Income Tax Act shall not be treated as a perquisite. Similarly, payment made by the employer directly to an approved hospital is also not a taxable perquisite in the hands of the employee. Therefore, if the hospital is approved within the criteria of the Income Tax Act, then the entire medical facilities provided to you by the employer are not taxable in your hands. However, you have to keep the proper documents ready if the Assessing Officer wants to verify the correctness of the claim.

I am a senior citizen. I sold some of my personal assets such as motor car, furniture & fixtures, old paintings and agriculture land. My only source of income is interest on fixed deposits and mutual funds, which is around Rs. 6 lakh p.a. Is there any tax implications in my hand on account of sale of personal assets? If yes,is there any tax saving scheme?

I believe that motor car and furniture & fixtures were held for your personal use and not for any business purpose. Any asset which is held for personal useis outside the purview of capital assets and, therefore, there is no tax implication on its sale.

If the agriculture land is situated beyond 8 km from the local limit of the municipality, then the income earned on sale of agriculture land is not taxable and is exempt.But you have to prove that the land is beyond the limit specified under section 2(14) of the Income Tax Act.

Painting is a capital asset under the Income Tax Act and, therefore, any surplus on sale of painting would be taxed as capital gain. If you can establish that you held the painting for more than three years, then it becomes long term capital gain.

There is no tax saving scheme for long term capital gain in your hand, except for investment in residential house if you do not have more than one residential house. Investment in government bonds is available only for capital gain which has arisen on sale of land and building.