Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: TDS :: empanelment :: VAT Audit :: form 3cd :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: cpt
 
 
News Headlines »
 Income tax filing FAQs part 1
 Filing Income Tax Returns? Things To Keep In Mind As Deadline Approaches
 Filing of online return for 4th quarter of 2016-17- extension of period thereof.
 New tax accounting standards may reduce leeway for infrastructure companies
 GST – CONCEPT & STATUS – As on 01st May, 2017
 Govt extends VAT deadline, relief for developers
 Income Tax Appellate Tribunal Rules, 2017
 Got your Form 16? You should file income tax returns early to enjoy benefits
 Want to save tax? Here are 6 best investment options for you
 Income Tax department activates e-filing facility for all ITRs
 All the income-tax return forms for the current assessment year are available online

Here is how you pay tax on income not received in cash
March, 09th 2015

There are several occasions where an individual will be in a difficult situation tax wise and this will happen as they have to pay tax even though the income might not have been received in cash. This can put a lot of pressure on the financial condition of the individual and they need to have a plan in place that will help them to tackle this whole situation. This is significant as there could be a scramble at the end to try and get some cash to pay for the necessary amount but this can be avoided. Here are some of the conditions wherein such a situation would arise and how the individual can actually tackle it.

Mutual fund units

There are times when the individual shifts their units from one option or plan of a scheme to another option. This could mean something like changing the divided option to a growth option or vice versa. The same holds good for changing option from distributor option to direct option. In these cases there is no money that is actually coming in the hands of the investor as this is just a book entry and hence the changes are seen on paper only. However this result in a sale according to the income tax act and this could mean that there is some tax that has to be paid which would have to come from some other funds. This is also a condition wherein it might not be the decision of the individual to effect the change especially as seen in case of a merger but still they would end up bearing the tax impact.

Accumulated interest

There are several fixed income instruments where there is interest that is being accumulated. One of the most common examples here is that of the National Savings Certificates wherein the interest accumulates each year and this is paid out only at the time of the maturity of the instrument. Now the interest here is taxable which means it has to be included in the income of the individual and the tax paid on this. Similarly there could be a cumulative fixed deposit wherein the interest keeps on accumulating and this would be taxed but still the individual has not received the amount of the income.

Deep discount bonds

In case of many fixed income instruments there might be a slightly temporary mismatch if the duration of the instrument is less but in many of them like deep discount bonds there is a very long time period that is present. This could be a decade or more and in this case too there is income that is being earned each year. Once again this would be taxable and the individual would have to ensure that they are paying up the amount of the tax from their other sources of income if they are showing the accrued interest as income each year.

Planning

There is a way in which the whole situation can be tackled and this would involve knowing in advance the kind of income that these kinds of investments would actually generate. This is crucial because a wrong estimate can lead to a large amount remaining out of the plan and providing a shock at a later stage. There has to be separate cash that is set aside for this purpose and it would be better if this is done right at the time of the investment itself because in a majority of the cases the fact that this kind of situation would arise would be known beforehand. Planning for this would ensure that there is no cash pressure and that things go smoothly for the investment.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Article Management Solutions System Article Management Software S

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions