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May 23, 2000

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"What are the tax implications of collecting currency?"

The Rediff Money Channel presents everything you wanted to know about tax issues, but didn't know whom to ask.

I have received a notice from I T authorities for assessment of scrutiny. Since I did not attend on the date specified, the ITO has passed an ex-parte order and issued me a demand order of Rs 54,234. I would like to appeal. My income is below the taxable limit. Should I pay the amount before appealing?

— Ujas Shah

As we do not have the exact facts of the case, we have endeavoured our best efforts to guide you with regard to the appeal.
You may file an appeal against the order of the ITO with the Commissioner (Appeals) u/s 246A of the IT Act, 1961. The appeal must be made in Form 35. The documents required to be submitted along with the appeal are as follows:

Memorandum of appeal in duplicate
Statement of facts and the grounds of appeal in duplicate
Copy of the order appealed against
Notice of demand in original

In your case, the appeal has to be filed within 30 days of the date on which intimation order is served. However, the commissioner may condone any delay if he is satisfied that the appellant had sufficient cause for not presenting the appeal within the allowed period.

The fees for the first appeal are as follows:

Assessed total income of Rs 100,000 or less: Rs 250
Assessed total income of more than Rs 100,000 but less than Rs 200,000: Rs 500
Assessed total income of more than Rs 200,000: Rs 1,000
Any other subject matter (as applicable from June 1, 1999): Rs 250

What are the tax implications of an individual whose hobby is collect currency coins & notes? I wish to understand what happens when such a person accumulates a great deal of foreign currency (eg: a passionate collector of many years) worth a large sum of money.

— Manjula Radhakrishnan

Exchange Regulations: The Reserve Bank of India has permitted residents to hold foreign currencies for numismatic purposes not exceeding US$ 2,000 and in excess of the specified limit has to be sold to an authorised dealer within seven days.

Wealth Tax: In case of an individuals, cash-in-hand in excess of Rs 50,000 at the last moment of March 31 immediately preceding the assessment year is considered as asset assessable to Wealth Tax. However, Wealth Tax is applicable at the rate 1 per cent of the amount by which net wealth exceeds Rs 15,00,000.

Income Tax: The net income arising on the sale of such currency would result in income chargeable under the head income from other sources.

I have lost my income tax acknowledgement. Could you please advice me what should I do now.

Nothing much can be done if you have lost the IT acknowledgement. However, you could meet your assessing officer to obtain the serial acknowledgement number of filing of return. This can be obtained easily from the register maintained at the IT office.

I have sold units of MEP-91, Mep-92 and MEP-93 during FY 1999-2000. TDS has been deducted on the face value of the units of MEP-91 & 92 while TDS has not been deducted in case of MEP-93. Please explain me the taxation effect of my sale of MEP units.

— Amul Sanghrajka

Section 194F states that the person responsible for paying any amount referred to in section 80CCB shall, at the time of payment thereof, deduct income tax thereon at the rate of 20 per cent plus 2 per cent surcharge for the FY 1999-2000. It may be noted that section 80CCB is applicable if investment was made during the previous years 1990-91 and 1991-92 in the notified units of Equity Linked Saving Scheme of UTI or a mutual fund. [MEP 91 & 92 are eligible investments under section 80CCB]. Since80 CCB has been deleted from AY 1993-94, hence MEP 93 does not come under the purview of section 194F and hence no TDS is deductible on it.

Coming to the second part of your question, as such you have to compute capital gains [i.e the difference between the repurchase price/sale price of the units and the indexed cost of Investment/acquisition] on the sale of the MEPs. Moreover, the deductions availed under section 80CCB in the year of investment will be deemed to be your income in the year of repurchase/sale.

My friend was working for a IT company in Bangalore and the company deducted Income Tax @Rs 500 for five months. This is clearly shown in the pay slip and the nett amount is equal to the amount shown in the bank statements. The company after number of requests, send the Form 16 just showing gross salary and tax deduction as Nil. They have also said as the Employee quit without giving one month notice she has to pay a week's salary while they have not paid a month's salary. I would like to know what action can I take on a company which issues a Faulty Form 16.

— Pradeep Agarwal

The IT Act stipulates that the tax deducted by the employer has to be deposited into the government treasury within seven days of deduction. Hence, if you have in your possession the pay-slips evidencing the fact of TDS, the company is bound to deposit the deducted amount into government treasury else the company would be in default. Further, the company has to issue the TDS certificate in Form 16 to the employee within one month from the end of the financial year specifying the TDS and the date and bank in which the same has been deposited.

What can I do if my previous company is not issuing me the TDS Certificate?

— Buji Babu

The time limit for the issue of TDS certificate is dependent on the nature of income. In case of tax deducted at source on salary, Form 16 is the TDS certificate and the time limit for the issue of such certificate is within one month from the close of the financial year. In case of the financial year 1999-2000, your previous Company is bound by the IT Act, 1961 to issue the TDS certificate within April 30, 2000.

Assume an individual pays all his tax by the way of advance tax and he has bank deposits on which the bank would deduct TDS. Can he submit the form 15H so that the bank doesn't deduct the TDS?

— Tulsi V Gurbani

The declaration in Form 15H is to be made in duplicate, in case the tax on your total income will be NIL. However, in your case as there is some tax liability for which you are paying advance tax, it would be advisable for you to make an application in Form 13 to the concerned assessing officer and obtain a certificate in Form 15AA authorising the payer to deduct tax at lower rates or deduct no tax, as may be appropriate.

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