'The mutual fund capital gains will not show up in your 26AS statement, but still needs to be declared in your return.'
Tax Guru Anil Rego answers your personal income tax queries.
Nitish Srivastava: My father expired in April, 2020. He has made me nominee in a TDR worth Rs 8 Lakhs. Will there be tax implication in the same?
I am in a PSU and regularly filing my returns. Can you suggest how to reduce or avoid tax implication, if there is any?
Anil Rego: If a person dies, the legal representative has to file tax returns on behalf of the deceased to report the income earned by the deceased until the date of his death, and taxes deducted thereon.
Legal heir has to register himself at the income tax website for filing the return on behalf of decease.
Any income earned after the date of death from the assets inherited from the deceased is taxable in the hands of the legal heir. Legal heir should include this income inherited from the deceased in his own income while filing own income tax return.
One cannot avoid the additional income being added to your regular income, but one can look to make maximum use of various deductions that are available tax saving investments under Section 80C, medical insurance under Section 80D for self and parents, NPS under Section 80CCD, donations under Section 80G, etc.
Yogen Shah: I wish to know tax implication of capital gain for shares tendered under buyback and accepted. Whether capital gain, short term or long term is exempt from capital gain tax? If it is under what section? This is because the company which declared buy-back is required to pay 22.4% tax on total buyback amount.
Anil Rego: The shareholder is not liable to pay tax on capital gains of shares tendered in a buy-back offer both for long-term and short-term capital gains. However, they cannot set-off any capital losses as the capital gains are tax-exempt.
Pralaya Kishore Nayak: I am a salaried person with income of 36 lakhs and living in non-metro city and from medical profession. How much or what percentage of the salary can be exempted under U/S 10 as conveyance, academic and other allowances? Some time they don't mention it in Form 16, so it is difficult to deduct it from the gross salary.
Anil Rego: There is no cap on percentage of salary, but on individual exemptions under Section 10:
Children's Education Allowance: The maximum amount exempted is Rs. 100 per month or Rs. 1200 per annum for maximum of up to 2 children. Separately, you can also claim deductions for fees paid for your children under section 80C
Hostel expenditure allowance received by you for your children from employer is eligible for exemption up to Rs. 300 per month or Rs. 3600 per annum for maximum up to 2 children.
Transport allowance is exempt up to Rs 800 per month (Rs 9,600 pa)
Least of the following is exemption of House Rent Allowance (HRA):
1) HRA received through salary
2) Rent paid: 10% of salary
3) 40% of salary for a non-metro city
LTA is available on two journeys in one block of four years. The amount of exemption available is lower of the actual amount spent to reach the destination via shortest route or the amount received from the employer.
Sandeep Sarode: I have filed my income tax return for assessment year 2020-21 on 20/07/2020 but till now my ITR is not processed and intimation u/s 143 u/s is not sent. When I raised the grievance with e-Nivaran I got the reply like cpc 2 is rolling out and once it is rolled out your ITR will be processed. So I want to know what is the maximum time limit to process income tax ITR and what further steps I have to take for the processing of ITR. Waiting for your reply.
Anil Rego: Income tax department has to process the ITR within the expiry of one year from the end of the financial year in which return was filed. Therefore, for your return filed for FY 2019-20 in July 2020, it must be processed by March 31, 2022.
Tax refunds, if any, are generally issued much earlier, in around 1-2 months' time, after the processing of ITR by the Central Processing Centre unless it comes up for scrutiny.
Sanjivani Maheshwari: I have invested in Alternative Investment Fund II (AIF ii). This AIF fund invests in real estate projects. My question is regarding tax treatment related to income from AIF II. Fund manager is currently deducting tax on gross basis on the income of the fund and not offsetting any expenses or management fees from the income.
What is going to be the treatment of such income in investors' hand? Can I offset management fees from the interest income of the fund? This management fee is charged by the fund for their services provided against the investment in the fund so I should be able to offset management fee and fund expenses from the income of the fund. Please advise
Also, I want to check with you if i can offset the equalisation amount received with the equalisation amount paid. Currently the fund is not netting equalisation amount and deducting tax on equalisation amount received. Please provide details on tax treatment for AIF II funds.
Anil Rego: Any income earned by a SEBI registered category I and II AIF, is exempt from tax in the hands of AIF under section 10 (23FBA) of the Act. Such income shall be taxable directly in the hands of investors of the AIF under section 115UB of the Act.
- Any income distributed by fund is not liable of DDT
- Any income distributed by fund, TDS of 10% has to be deducted by fund u/s 194 LBB
- In case of losses, loss will be not be allowed to pass through investor but would be carried forward at AIF level to be set off against income of future years
- No expense setting off is available
Satish Chandra: I am a 62-year-old singleton retiree living on interest income from my FD. Every year TDS used to get deducted from this interest income and I used to submit 16A form given by the bank to claim refund. I have also invested in Equity Mutual Funds from these interest amounts in different AMCs in the past few years, and though I used to do switches, I have NOT done any profit booking as there is no need for me to do so.
Now my query is as per new ITR should I show the investments in these MFs too? Right now, the 26AS form only shows the TDS deducted.
Anil Rego: You need to include short/long term capital gains/losses of mutual funds while filling your ITR, along with interest income.
Switches from one scheme to another will be treated as transfer under the IT act 1961 and will be subject to levy of capital gain tax, even if the gains are reinvested and not removed.
Whenever you switch or sell any mutual fund, you need show it as the sale value and compute the capital gain/loss by reducing the corresponding purchase value from the sale value.
The mutual fund capital gains will not show up in your 26AS statement, but still needs to be declared in your return.
Satyanarayana Thota: My aunt (smt P Nirmala Bai) is bed-ridden; her Aadhar card is not having full information with Ref to date of Birth (having only year no date and month) without full date of Birth, PAN card application not accepted. No PAN card since bed-ridden, going to Aadhar center ruled out. how to file IT return without PAN card?
Anil Rego: The Income Tax laws have envisaged certain situations where the tax assessee is unable to file returns on their own. There is a provision to file a return as a Representative Assessee. One can also apply for a PAN Card as a Representative Assessee.
Rajesh Arora: I have a tax query. If a person has two houses (both self-occupied) jointly owned with spouse (no earning from houses) and if the only source of earning is salary (<30 Lakh category) then which ITR form has to be filled for Assessment Year 2020-21?
Anil Rego: You can use ITR-2 Form for your requirement of two-house properties & income from salary
Illustration: Uttam Ghosh/Rediff.com
Do you have any personal income tax query? Please mail us at firstname.lastname@example.org with the subject line 'Ask Anil' and Anil Rego will answer all your tax queries.
Anil Rego is the founder and CEO of Right Horizons, an investment advisory and wealth management firm that focuses on providing financial solutions that are specific to customer needs.