Worried about the long-term and/or short-term capital gains tax?
Tax Guru Anil Rego answers your personal income tax queries.
Gopinath Raghavan: I am an individual professional offering consulting services in the area of Technical consulting. If my income exceeds 50 lakhs a year but less than 1 crore at what rate will I be taxed if I do not have any expenses declared? In such a case will I have to maintain books and be audited by an auditor? Under what section of IT act will I be placed -- Section 44AD?
Anil: As per Section 44AA, of income tax act 1961, you need to maintain books of accounts compulsorily. You cannot be covered under the presumptive taxation scheme as your income is above Rs 50 lakh.Since your gross receipts out of profession exceeds Rs 5o lakh, Tax audit needs to be done. As a consultant, your income is taxed under the head 'Profits and Business or Profession'.
You are allowed to claim expenses on actual basis which have been incurred by you in connection with your work.
You may opt for traditional tax slab or new tax regime (without deductions) based on what works better for you.
Sanjay Dabir: I am a freelance consultant and hence I file ITR3 with 44ADA.
1. How / where do I enter LTCG and STCG for Equity and Debt Mutual funds scheme?
a. Is Indexation applicable to Equity MF redemption – over 12 months?
b. For Equity MF, it asks me to enter in the tab titled Sec112, where it doesn't consider Indexation.
c. For MF, there is no separate tab.
2. I have sold RSU's in USA? Where do I enter the details? How do I apply indexation to such transactions, since RSUs were held by me over 24 months?
1. You need to enter LTCG & STCG of Equity & Debt Mutual funds in the schedule 'Schedule-CG: Computation of income under the head Capital gains' in ITR 3.
a. Indexation Benefit is not applicable to Indian listed Equity or Mutual Fund related instruments. You may avail an aggregate exemption of Rs.1 Lakh in a year towards LTCG from equity funds & listed stocks taken together.
b. In ITR-3, you need to enter under section 112(1): sale of Equity share or unit of equity-oriented fund on which STT is paid.
c. For Equity MF & listed stocks you need to fill details under Schedule 112A. Some of the details required are ISIN Code, Name of the share/Unit, No. of share/Units Sale Price, Fair value of consideration, Cost of acquisition. etc.
2. Your capital gains would be long term and will be taxed at 20% after indexation for inflation (same as unlisted shares since it is not listed on an Indian stock exchange).It may be noted that the capital gain is the difference between the fair market value on exercise and the sale price.It will need to be captured under Schedule CG of the ITR.
Sanjay Agarwal: Amount received by sale of ancestral agricultural land is taxable or not.
Anil: Agricultural land in Rural Area in India (as defined by the Income Tax Act) is not considered a capital asset. Therefore, any gains from its sale are not taxable.If agricultural land is not in a Rural Area it is taxed as any other capital asset.
nalin kishore: My query is - I have not received Form 16 and Form 26AS update from my pension disbursing bank. In spite of several reminders to the branch manager I have not received these two documents. The manager says he has told his CA but nothing is happening.
I have all details of pension received from the bank statement. There is only one type of income that is Pension/DA/Arrears of pension, nothing else. No HRA, LTC,etc.
Form 26 AS is not showing details of bank/pension.
Can I file my ITR? Or, should I file it or wait for the Form 16 and Form 26AS?
Anil: We recommend you wait till a few days before the due date of tax filing.If you still don't receive it, you can file your ITR before the due date, based on income credited to your bank a/c and also include any other income that is subject to taxation.
kikki: I have worked continuously in one organization for ~ 32 yrs having its own PF trust and left job at the age of ~ 54 yrs. I have withdrawn MY PF at the age of ~ 59 Yrs. My query is whether PF withdrawn (app. 35 lakhs) at the age of 59 yrs after leaving 5 yrs of job is taxable or not?
1. My organization has not deducted any TDS when PF was withdrawn at the age of 59 yrs
2. I was not employed after leaving job at the age of ~ 54 yrs as employee anywhere.
Anil: Since, you have worked for more than 5 years in the organisation, there is no tax on PF interest upto the period you were employed.Interest on PF is taxable after this period.
kishor patil: My wife is a lawyer, she wants to file Income Tax return for 2019-2020. Kindly advise which ITR Form is used for lawyers.
Anil: We suggest you to file ITR – 3 (For individuals and HUFs having income from profits and gains of business or profession) if she is practicing.However, if she is employed in a company or a legal firm, you can file ITR 1 or 2 based on the circumstances.
ANIMESH SRIVASTAVA: I want to know what are the tax benefits we can take in the New Tax Slab? If I opt new Tax slab were 5 Lakhs Income we have to pay No Tax for April 2020 To March 2021. Is there any Income Tax benefits we can Take above 5 Lakhs?
Anil: As per Budget 2020, if an assessee opts for the new tax regime, one will have to forego around 7o deductions & exemptions. This includes major deductions like Sec.80C, standard deduction of Rs.50K, HRA, etc.
You can still claim following exemptions under the New tax Regime:
- Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
- Any compensation received to meet the cost of travel on tour or transfer.
- Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
- Transport allowances in case of a specially-abled person.
upashu: I have two houses one on rent and one under construction. I am paying to builder along with TDS and TDS are reflected in Form26AS. Which ITR form should I fill?
Anil: You need to file ITR-2 when having two house properties.I am assuming that you are not having any consultancy or business income, in which case you would have to fill the appropriate returns.
subodh bhatt: I have a question for capital gain: I have made a long term (after 3 years) capital gain of Rs 3,oo,ooo/- from debt mutual fund. The gain reduces to Rs 274000/- after indexation. I have also made a long-term capital loss (after 1 year) from equity mutual fund of Rs.1,80,000. Please help me with the taxability of these gain/loss after adjustment of gain/loss. The relavant F.Y. is 2019-2020.
Anil: Yes, if you have incurred any capital loss on selling Equity funds after 31-03-2018, you can set them off against any LTCG.In your case, you can set off this long-term capital loss against Long Term Debt MF capital gain and the balance gain will only be taxable.
Subramaniam Natraj: Kindly let me know whether Normal Citizens - Female below 60 Years of age are eligible to claim Standard Deduction of Rs.40000/- from Interest Income i.e. Other Sources of Income.
Anil: Assuming you are opting for old tax regime, you can claim standard deduction of Rs. 50,000 (increased from Fy 2019-20) for Salary income. This deduction is not available for income under any other head.
If any of your interest income is from Savings Bank interest, you can claim a deduction of Rs.10,000 under Section 80TTA. If savings bank interest income is less then Rs.10K, the entire interest will be your deduction. If your interest income is more than Rs.10K, your deduction is limited to Rs.1oK.
Anonymous: Where to show the Pension Income (Annuity) while filing one's ITR in the Income Tax Website - incometaxindiaefiling.gov.in. Shall be grateful for an early reply on the above matter.
Anil: If your pension is from a fund that your employer has contributed, it is to be filed under the head 'Income from Salaries'.
If on the other hand, you invested into an independent policy from your funds alone (without any contribution from your employer), then it is to be filed under 'Any other income' of the schedule 'Income from other sources'.
subodh rai: I have capital loss from sale of Equity Mutual Fund both from short term & long term. But there is a long term gain from sale of Debt Mutual Fund. How the income tax will be calculated? Can gain & loss be combined or it will be taxed separately? Shall be thankful to receive your advice.
Anil: As per amendment mentioned in budget 2018, if you have incurred any capital loss on selling Equity funds after 31-03-2018, you can set them off against any LTCG.
Short term Capital losses are allowed to be set off against both long term & short term gains.
If you are unable to set off the entire capital loss in the same year, both short term & long term capital losses can be carried forward for 8 assessment years.
VK REJU: I have already filed my IT returns. Only after submitting I realised that I forgot to include NPS in it. Is it possible to modify the returns and include NPS in it?
Anil: Assuming you have filled your original return on or before due date, you can file revised return u/s 139(5) and include NPS deduction in it.
Pareshnath Mandal: 1. I have salaried income above Rs.50 lakhs. 2. I was in USA, then My employer allotted some Shares of Company, which I still retain. 3. So far I have not sold any share. 4. ITR 2 requires to fill-in Assets & Liability statement. 5. My question is Shares allotted by my Employer while at USA which I still retain, has to be shown/added with my present assets in India? I am now employed in India.
Anil: Currently as you have not sold the shares, you need not include it in the computation of your taxes while filing a return. Whenever you sell the same, you need to report this capital gains from the sale of Foreign Shares.
The details of Foreign Shares should be reported in Schedule FA i.e. Schedule Foreign Assets of the ITR. This is required as part of the overall disclosure of assets that is required for you.
Niraj Agrawal: My query is w.r.t a Partnership Firm which got dissolved in March 2013 and has loss and tax audit is not applicable for the year.
1. Is it mandatory to file income tax return for partnership firm in the financial year 2012- 13?
Anil: It is mandatory for every partnership firm to file the return of income irrespective of amount of income or loss
2. Was online filing mandatory for the F. year 2012-13 for partnership firm?
Anil: Yes, online filing is mandatory.
- Will your answer above in point number 1 and 2 will change in case partnership form has no profit that is loss during the financial year 2012-13?
Anil: Irrespective of having gain or loss, it is mandatory to file tax returns for a partnership firm.
4. A Firm with loss can file manual return for the financial year 2012-13 or may choose not to file?
Anil: Irrespective of having gain or loss, it is mandatory to file tax returns for a partnership firm.
ARUN R: Recently I closed fixed deposit of my mother's in lakshmi vilas bank and transferred 5 lakhs to my account. I have some company based society account which I wish to invest for safe return. I started filing ITR from last year only due to trading in F&O. Does it raise any questions from income tax regarding this? Is it fine to go ahead with this investment? My annual package is 3.8 lakhs.
Anil: Gifts of any amount received from or given to any relatives - parents, spouse, your and your spouse's brothers and sisters, brothers and sisters of your parents and your and your spouse's lineal descendants are entirely tax-free. You can go ahead with the investment.
The returns generated through such investment is added to your income and tax liability will be based on your income tax slab.
Sanjaya: A joint ownership (50:50) property was sold. There are some capital gains & it falls under Long Term Capital Gains. In ITR2 how it should be recorded? Both the parties will show 50% of gains each in gains & registration amount section? Please clarify
Anil: Any income arising from the house property will be apportioned equally between the co-owners and taxed separately in the hands of both.
It may be noted that if the co-owner has not contributed anything for purchase of property, then he / she will not be treated as co-owner.
After determining the Full value of consideration, the cost of acquisition for each co-owner shall be reduced to compute the capital gains for each co-owner separately. For a long term asset, the benefit of indexation is available.
Eligible deductions can be availed by both co-owners individually and the Long Term Capital Gains can also be reinvested for tax savings individually.
Satish Panghal: I want to ask that I joined the present service on 10-07-2019, but got salary from July 19 to March 20 in the month of May 20. Now tell me while filling ITR Return what should I do? I have to show my salary in present ITR Return or in Next year ITR.
As per the income tax laws, you need to pay tax on salary even if it is not actually received in the financial year.However, it is good to talk to the company and understand how they are recognizing it.
Ideally, the company should also recognize the income in the last year and deduct the TDS for the last year.Accordingly, it should show up in the 26AS statement for last year and you need to file your return on this basis.
Do you have any personal income tax query? Please mail us at email@example.com 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.