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  • Category: Investments

    Advice on investing the the property sold amount in FD

    Interested in investing in FD? Wondering if it is worth it for a senior citizen instead of splitting among family members and investing? Get answers for all your concerns on this Ask Expert page.

    I sold an old house for 12 lakhs and want to invest it in FD, so that I could earn monthly interest. I'm not working, retired from my business.
    How could I deposit this amount in FD without the tax issue? Since I'm a senior citizen, I will get higher interest rate if deposited in my account, instead of splitting them across my family members.
    How could I do that?
  • Answers

    4 Answers found.

  • When a person sells a house, he is supposed to pay the capital gains tax on it and mention it in his income tax return. Anyway, in your case as the house is old and consideration is not much there may not be any tax as it will be annulled with price index rise during such a long time. If you are a tax payer and filing the return then you can bring this fact in your income tax return for record purposes. This can be done in the assessment year relevant to the year in which the house was sold.

    You have a few options for the investment and you can deposit the amount in Post Office monthly scheme or you can deposit in a Bank under the senior citizen category. In Post Office the interest rate is around 7.5% and in bank it will be in the range 7-8%. These interests are taxable but there are rebates available and accordingly the tax liability will be decreased or nil as the case may be.

    This income from interest from Post Office or Bank is to be clubbed with your other income and accordingly the tax calculations are done. In the Budget 2018, for senior citizens if the interest is less than Rs 40000 per year there will not be any TDS on the interest.

    You have to see your total income and after calculations if you find that you are not paying any tax then you can fill the prescribed form 15H and give it to the bank while opening of FD so that they will not deduct any TDS on the interest amount and you will not be having hassles of getting it refunded from the Income Tax department after filing the return. Please note that a return is required to be filed if you claim a refund.

    In Post Office, the duration of the deposit is fixed - 6 years but in Bank you can choose anything from a shorter period to about 10 years. Please note that the rate of interest in the Banks change with the duration so you choose a duration for which it is highest. In case the rates go still higher you can break the FD anytime by paying a little penalty and book it again for the new rates for an appropriate period.

    Knowledge is power.

  • The amount you obtained by selling your capital assets is considered as capital gains and it is to be shown in your income tax returns. The value you got in this sales, if you are reinvesting in purchasing another asset, you need not pay tax on this. Anyhow the details regarding the tax can be taken by a tax consultant and you can act as per his advise.
    Then the question of investment comes, FD in a nationalised bank or post office is the safest mode of savings. But returns may be a little less than other saving methods. As a senior citizen, you will be getting some additional rate of interest. If the interest you are getting is more than Rs.40,000/- the interest income also is taxable. The rate of interest will be varying from time to time based on the bank and duration of the deposit. The post office may be giving you about 0.5% fewer returns than the banks. The higher the duration of the deposit the higher the rate of interest.
    You can plan your deposits keeping the above facts in mind.

    always confident

  • If the interest rate should not be more than 40000 for the tax exemption.

    I have accounts in two different banks, can I split the amount across those banks to get 40,000 interest in each banks,so that I get tax exemption? Is that possible?

    I get this question because while filling ITR we will be showing all the accounts linked to our PAN card.

  • #153200:
    No you can not do that. All the interests on bank FDs are to be clubbed before applying rebate or applicable deduction.

    In Income Tax rules it is very clearly mentioned and specified that all the income of the person from whatever different or similar sources is first to be clubbed and after that only the exemptions and rebates are worked.

    Now a days every thing is linked with PAN and in many cases with Aadhaar also and there is no point in keeping part amount in different banks or different investment schemes.

    So we should be accurate and careful in disclosing our income from various sources.

    Knowledge is power.

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