KARAN SEHGAL
PANAJI
Even as Interim Finance Minister Piyush Goyal announced that individuals with upto Rs 5 lakh yearly income would not have to pay income tax, for Goan couples, it will mean that they will be exempt from any income tax if their combined yearly income does not exceed Rs 10 lakh.
This is because Goan couples, as income-tax-payers, are covered under the section 5A of the Income Tax Act and the Portuguese Civil Code rules. These rules provide that income of the husband and the wife is equally divided between both the spouses with the exception of income from salary.
For the sake of an example: If a businessman is making Rs 10 lakhs profit in Goa, his income will be split between him and his wife making it Rs 5 lakhs each, which will ensure that neither husband nor wife will have to pay any income tax.
Section 5A of the Income Tax Act and the Portuguese Civil Code rules are applicable to those parts of India, which were ruled by the Portuguese, which includes the state of Goa and UTs of Daman & Diu and Dadra & Nagar Haveli.
Since Goa was a Portuguese territory upto 1961, Goan couples are covered by Portuguese Civil Code rules for the purpose of income tax. Couples in other states of India, which were not ruled by the Portuguese, will not be able to get this benefit.
Yatish Vernekar, chartered accountant, said, “In Goa, under section 5A of the Income Tax Act, Portuguese Civil Code is applicable. As per which, any income, apart from salary income, is split between husband and wife for tax purpose.”
He continued, “This is applicable on all sorts of income like business income, rental income, interest income and etc. But, it shouldn’t be salary income.”
Vernekar further said that
there are other provisions in the Income Tax Act using
which a Goan couple with an annual combined income of Rs 18 lakhs can get it totally exempt from tax.
He explained, “Investments of upto Rs 1.5 lakhs in instruments like LIC policies and provident fund (PF) schemes per year are exempt from tax. Then, yearly investment upto Rs 50,000 in national pension scheme (NPS) are exempt from tax. Further, upto Rs 2 lakhs interest on housing loan per year is exempt from tax. Add all of these to Rs 5 lakhs and it means that an individual with upto Rs 9 lakhs income a year can get it totally exempt from tax.”
“In case of Goa, because of section 5A, this will mean that couples with combined annual income of Rs 18 lakhs can get it totally exempt from tax,” Vernekar concluded.
