Money talk

Dear Readers
From this week onwards, we are introducing a column, wherein your questions and queries regarding any kind of financial matter pertaining to Banking, financial markets, taxation and insurance will be replied by a Certified Financial Planner. You can send your questions on the email address:

I am a non resident Indian employed in Saudi Arabia. I have been told by a friend that there is a new pension scheme in India, wherein non residents working anywhere can join and draw pension after their retirement?
(Farooq Ahmed Rather)
Under the National Pension Scheme, now in vogue, every individual aged 18 to 60 years whether resident or non-resident, whether employed or self employed can join the scheme under individual or corporate arrangement. On joining the scheme, a unique 12 digit Permanent Retirement Account Number would be allocated to the joinee . As per the scheme, the beneficiary has to deposit any amount of his choice at regular or irregular intervals till  he attains the age of sixty years , subject to the restriction that  a minimum amount of Rs.500 has to be deposited  every time when a deposit is made and the minimum total deposit in a year would be Rs.6000 with at least  one frequency during the year. No further amount can be deposited after the age of sixty. It is naturally understood that higher the amount deposited, higher would be the corpus and the consequent monthly pension. No amount is permitted to be withdrawn from the account till the age of sixty years. At the age of sixty ,  a minimum of 40% of the amount accumulated in the account would necessarily have to be invested in an annuity scheme , whereupon a monthly pension as per the value of the corpus would be payable to the  depositor and then to the spouse in case of his or her death. Balance of 60% can be withdrawn in one go by the depositor and can be used by him as per his choice .  Because of  the uniform 12 digit account number, this account can be operated anywhere in the country, irrespective of the status of employment . There is a provision of add on account also . Basic account opened as above is called Tier I account. Add On account would be known as Tier II account and would be voluntary in nature , wherein amount can be withdrawn as per the choice of the account holder . However opening of Tier II account is optional , whereas opening of Tier I account is mandatory.This National pension scheme is manged by an NPS trust and is  regulated and monitored by PFRDA, the Pension Fund regulatory Development Authority . Performance of Fund Managers is reviewed by the NPS trust on a regular basis. In case of the corporate arrangement also , the same rules apply . However in this case , employer employee group together becomes the depositor and the employer may also contribute some portion of the deposit on a regular basis.  Accounts under the scheme can be opened in all such public sector as well as private sector banks  which are enrolled to act as Point of Presence (POP). You need to provide your proof of identity , proof of address  and proof of age along with the requisite application form to the POP of your choice for opening the accounts

I am a young educated person , who could not find any employment . Now I have started my own small business and I am slowly establishing myself. please let me know , whether I have to pay income tax?
(Arif  Hussain)
You have not provided full details in your question, since you have not informed about the amount you are earning presently. However for your information, I would like to inform you that income tax is a tax levied by the Govt of India as per your income. In terms of the prevailing rates , in case of an individual , income up to Rs.2.50 lacs is exempt from income tax and for incomes beyond that amount up to five lacs income tax is charged at the rate of 10% , with a further educational cess of 3% on the tax payable as such. In your case, it is necessary that you immediately get a PAN card issued if not already done and ensure that  you  route all your earnings through a bank account  besides keeping a proper record of all your receipts and payments. If your earnings in the year are more than Rs. 2.50 lacs , please do pay the income tax after calculating as above. As a young entrepreneur  , it would always be advisable for you to file a return of your income with the Income Tax Department irrespective of the fact , whether you pay tax or not. Moreover the most important thing is that without keeping a proper record of your earnings  and without filing a return, you will not be able to build up your capital which you must understand is the most valuable commodity as far as business is concerned and is always scarce.

I sold my residential house, which I had purchased about ten years back. Entire amount of sale has been received through a cheque. My friends are advising me to pay income tax on the amount of gain that I have made as a result of this sale. Kindly advise me about the factual position in the matter?
(Syed Munnawar)
You have not provided the full details regarding the amount paid at the time of purchase and the amount received at the time of sale. However for your convenience, I would try to explain the matter in its real perspective. Whenever a residential property is sold, we need to calculate gains effected through the transaction and such gains are known as Capital Gains . These gains are known as Long term Capital Gains if the property is sold after a gap of more than three years , otherwise it would be known as Short term capital gain. In your case the effected gains are long term capital gains , but you have to understand that these gains are not calculated through the mere difference in the amount of purchase and sale . Instead the purchase cost has to be updated for the factor of inflation during the intervening period and the purchase cost would therefore need to be indexed by applying cost inflation index for the relevant years. Presuming that your purchase price in 1995 was ten lacs and the sale price in 2015 is 25 lacs , Purchase price will have to be updated through indexation by  multiplying cost with the ratio of  1995 cost inflation index of 281 and 2015 cost inflation index of 1081 which will be 3.84 . In this case the purchase cost would therefore get indexed to 38.47 lacs and since you have sold it for Rs. 25 lacs only , there is capital loss in this transaction and therefore no tax is payable. In fact this loss can be carried forward for eight years for adjustment against any future capital gain during this period.