Weekend Q&A: Which Income Tax Form Has To Be Used If Your Source Of Income Is Only From Bank Interest?

My client is a contract worker with a total receipt of 40 lakhs for the financial year 2023-24. He has not filed his return of income and now he has received notice from the income tax department. Can he file his return u/s 44AD for presumptive tax @ 8 per cent and how he can save any penalty?

Yes, he can file his ITR under 44AD but since the last date for filing of ITR was 31st December 2024, he cannot file a regular ITR but can file an updated ITR after 1st April 2025 but will have to pay 25 per cent of tax and interest over and above regular tax and interest.

A minor child has inherited Rs. 15 lakh. Now, if he were to invest this money in any product, can he submit Form 15G to avoid tax deduction at source on the income accrued on investments?

All the passive income beyond Rs. 1500/- earned by a minor child is required to be clubbed in the hands of the parent who has higher taxable income in India. These clubbing provisions do not apply if the child has a physical or mental handicap or the child earns an income from their special skills or knowledge. Once the child becomes a major, the amount that was being clubbed when he was a minor, ceases to be clubbed.

Since the income is required to be clubbed in the hands of the parent, the parent only can file form 15G/15H if the tax payable by the parent on his or her total income including the clubbed income from the child is nil and his/her income from interest is less than the threshold applicable.

I have taken VRS from Central Government Public Sector Undertaking. I am 55 years old. Since the PF amount with interest is fully exempt from Income Tax at the time of retirement / VRS,  kindly let me know if I invest this amount in FDs again for that is the only source of income whether the interest earned will be subject to tax again. Please also suggest some safe investment avenues so that the capital invested will be safe with a reasonable rate of return. Which Income Tax Form has to be used if your source of income is only from bank interest?

Though the money received from a provident fund account is fully exempt, any interest income which arises on investment of these funds including in bank fixed deposits is fully taxable. Since you have taken VRS you can invest up to Rs. 15 lakhs of your retirement money in the Senior Citizen Savings Scheme within three months of your retirement. This scheme is for five years and can be extended for another three years and earns you 8.20 per cent annual interest paid quarterly. Since your only source of income is bank interest you can file  ITR 1. The balance of money can be invested in RBI floating rate bonds. You can invest in RBI floating rate saving bonds for seven years presently giving you interest at 8.05 per cent paid half yearly. These investments are fully risk-free.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his X handle

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