I have gifted a National Savings Certificate (NSC) to my minor child and invested in his name. By the time NSC matures, my child will become a major. I want to know: Will this amount be taxed in the hands of the elder child, or will the interest be included in the income of the parent as per clubbing provisions? Also, will there be any difference on the basis of accounting (cash/earnings) and can the child freely choose between the two in determining his/her income?
—Name withheld on request
Interest income from investments is generally placed under the head “Income from other sources” (IFoS). IFoS can be offered to tax as per the method of accounting regularly employed by the taxpayer (ie business/cash basis). Each specific instrument would need to be assessed for its salient features, which would govern its taxability.
Further, any income earned from any property or investment gifted by the minor child shall be passed into the hands of the parents only unless the child is a minor. As per the clubbing provision, any such income is clubbed with the total income of the parents with higher taxable income.
Once the child attains majority, the income will not be added to the hands of the parents and will be treated as a separate taxpayer. The older child can decide the method of accounting he/she wants to choose while offering his/her income which is classified as IFoS.
I joined an IT company on 19th December 2016 and my last working day with this company will be 24th September 2021. Since this tenure is around 4.75 years and I work 5 days a week, can you tell me whether I am eligible for gratuity payment?
—Name withheld on request
We have assumed that your employer is covered under the Payment of Gratuity Act, 1972 (POGA).
As per the POGA, an employee who is employed for wages in or in relation to the establishment in force in the POGA, and has rendered continuous service for at least five years, shall be eligible to receive gratuity at the time of termination of his employment.
For the removal of your doubts with respect to the five-day working week, if an employee is not in continuous service for any period of one year or six months, he shall be deemed to have been in continuous service under the employer for the said period of one year. will be considered in or six months only if he has actually worked under the employer for not less than 190 days and 95 days, respectively, during the period of twelve calendar months or six calendar months preceding the date with reference to which the calculations are to be made . (Because it was a five day work week for your company).
As you have worked in the company for at least four years 190 days, thus for completing five years of continuous service, you will be eligible for gratuity.
Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG in India.
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