I have made an investment is my minor child’s name by gifting him a National Savings Certificate (NSC). My child will be a major by the time the NSC will mature. I want to know: Will this amount be taxed in the hands of the major child, or will the interest be included in the parent’s income as per the clubbing provisions? Also, will the basis of accounting (cash/accrual) make any difference and can the child freely opt between the two in determining his income?
—Name withheld on request
Interest income from investments is generally put under the “income from other sources” (IFOS) head. IFOS can be offered to tax as per the method of accounting (i.e. mercantile/cash basis) regularly employed by the taxpayer. Each specific instrument will need to be evaluated for its salient features, which will govern its taxability.
Further, any income earned by the minor child from any asset or investment gifted to him or her shall be clubbed in the hands of the parent only till the time the child is a minor. As per the clubbing provision, any such income is combined with the total income of the parent with a higher taxable income.
Once the child becomes a major, the income will no longer be clubbed in the hands of the parents and he/she will be treated as a separate taxpayer. The major child can decide the method of accounting he/she wants to opt for while offering his/her income which classifies as IFOS.
I joined an IT company on 19 December 2016 and my last working day with this company will be 24 September 2021. Since this duration is approximately 4.75 years and I work for 5 days a week, can you tell me whether I’ll be eligible for gratuity payout?
—Name withheld on request
We have assumed that your employer is covered under the Payment of Gratuity Act, 1972 (POGA).
As per POGA, an employee who is employed for wages in or in connection with an establishment to which POGA applies, and has rendered continuous service for not less than five years, shall be eligible to receive gratuity at the time of termination of his employment.
To address your doubt regarding five-day work week, if an employee is not in continuous service for any period of one year or six months, he/she shall be deemed to be in continuous service under the employer for the said period of one year or six months only if he/she during the period of twelve calendar months or six calendar months, preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than 190 days and 95 days, respectively (as it was a five-day working week for your company).
As you have worked at the company for at least four years and 190 days, thereby deeming to complete five years of continuous service, you will be eligible to receive gratuity.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
Never miss a story! Stay connected and informed with Mint.
our App Now!!