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Rediff.com  » Getahead » Tax Query: 'What's my liability on PPF interest?'

Tax Query: 'What's my liability on PPF interest?'

By ANIL REGO
January 04, 2023 09:39 IST
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Please mail your queries to getahead@rediff.co.in with the subject line 'Ask Anil' and Anil Rego, CEO, Right Horizons (external link), will answer all your income tax queries.

Illustration: Dominic Xavier/Rediff.com
 

Durga Prasad Tenneti: I could not file (my tax return) about our ancestral property sold in Feb'21. Though I tried to file it on the last day, the servers are not processing the request. A TDS amount of 14,250 was paid by the purchaser on my name. The value of the property sold was Rs 1.05 crore that was divided by 7 persons who are my brothers and sisters. As my share of the property I have got about 15 lakh. This amount was deposited in REC (Rural Electrification Corporation) for 5 years in the month of march 15th, 2021. Now can I file the transaction now? Please advice. 

Anil Rego: If you have sold the property after 24 months (which I assume, since you mention it as an ancestral property) from the date of acquisition then, it will be taxed at 20% (plus surcharge & cess) after indexation.

Investing in REC 54EC bonds will allow you to claim tax exemption under Section 54EC on long-term capital gains arising from the transfer of a tract of land or building.

Yes, you will be able to file your returns incorporating this transaction. You can claim a refund or pay additional tax (if any) while filing your return.

Deepak Gupta: I want to know my tax liability on the interest on PPF. In FY 2021-22 I have deposit Rs 4.5 lakh as VPF and my share in EPF is Rs 95,000 and employer share is Rs 80,000.

I have not yet received the interest of FY 2021-22 in my PF account. 

From FY 2021-22 there is a tax on interest of excess amount of PF after Rs 2.5 lakh. So what is the tax liability in my case for the FY 2021-22? And how I fill that in my ITR? 

Anil Rego: As per the provisions of the Income-tax Act, 1961, if EPF contribution by employee exceeds Rs 2.5 lakh during the financial year, interest accrued during the year on such excess contribution will be considered as taxable income at the normal tax slab rates. Hence, you would need to show the excess interest under the head income from other sources. 

Should I leave it blank? And fill it in next year income tax return filing. 

Anil Rego: You cannot file one year’s income in another year. You need to check your Form 26AS.

In case you have already filed the tax return for FY2021-22, you may revise the tax return by 31 December 2022 to claim the credit of the TDS.

Vina Vin: I have to sell some shares of a particular large company, originally purchased in 1970 and thereafter getting increased through Bonus Shares in different proportions till last in Aug'2016. Meanwhile the company has also changed its face value from Rs 10 to Rs 1 per share in 2003-2005 and thus increasing the no. of shares. Now I only know about the nos of shares I have.

Please enlighten me about the same as utter confusion is there.

My queries are:

1. How to calculate purchase cost and capital gains?

Anil Rego: In your case, the grandfathering clause will come to your rescue. The purchase cost can be based on the number of shares and the market price of the share as of 31st January, 2018.

Post 31st January 2018, if there are any corporate action that resulted in a higher number of shares, you will need to adjust for the price accordingly.

2. Is LTCG rule for Grandfathering applies in this and taking FMV on 31.1.2018 of this share?

Anil Rego: Yes- as mentioned above, grandfathering will be applicable thereby exempting gains until 31st January, 2018 from tax. Of course, the other benefit for you is that it significantly simplifies the computation for you.

3. If want to sell partially does FIFO rule to be taken.

Anil Rego: Yes, FIFO rule will apply for you for any corporate action after 31st January, 2018. As of the grandfathering date, all the shares held as of this date will be at one price and date. (This benefits you)

4. What will be the taxation process and to be shown under which schedule & ITR form no?

Anil: You will need to fill out the schedule for long term capital gains in form ITR 2.

A special rate of tax of 15% is applicable to short-term capital gains, irrespective of your tax slab. The Long-term capital gains (LTCG) over Rs 1 lakh on listed equity shares per financial year is taxable at the rate of 10% without the benefit of indexation.


Please mail your queries to getahead@rediff.co.in with the subject line 'Ask Anil' and he will answer all your income tax queries. 

You can find more of Mr Rego's answers here.


Note: The questions and answers in this advisory are published to help the individual asking the question as well the large number of readers who read the same.

While we value our readers' requests for privacy and avoid using their actual names along with the question whenever a request is made, we regret that no question will be answered personally on e-mail.

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