TAX TALK- 28.09.2009-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“SET OFF AND CARRY FORWARD OF CAPITAL GAIN LOSS”
Query 1]
Loss on Sale of shares( held for less than 12 months) i. e. short-term capital loss can de adjusted only against short term capital gains on sale of shares. If net balance is profit, the tax is required to be paid. Any option to save tax? If there is excess loss whether it is carried forward & can be set off against short term/long term capital gains for next year. Please clarify.
For long term capital gains on sale of shares (held for more than 12 months), whether long term capital loss (on sale of share) can be set off? Any avenues to save such tax. Please guide. [nayan.lagad@cosmosbank.in]
Opinion:
“Capital gain” constitutes a separate class in itself in the I.T. Act, 1961 for taxability and set off provision.
The basic rules are: -i) Losses under the head “Capital gains” cannot be set off against income under other heads of income (like salary income etc)ii) Short term capital loss can be set off against any capital gain (be it a short term or a long term). iii) Long term capital loss can be set off against long term capital gain only.iv)The loss, whether long term or short term capital loss, can be carried forward for maximum period of eight assessment years immediately succeeding the assessment year in which the loss is first computed.v) The benefit of carry forward of the loss is available only if the return is filed within DUE DATE of filing the same. (If, however, the return is filed after the due date of filing, the delay may be condoned if a few conditions are satisfied- circular No. 8/2001, dated 16.05.2001).
With above basic idea, it may be noted that1. Short term capital Loss on sale of shares can be adjusted against short term capital gain. It can well be adjusted against the short term capital gain of that year itself or even with the short term capital gain of subsequent years as well. If the net result after set off in any year is profit, tax is required to be paid. 2. Long term capital gain on sale of shares covered by Securities Transactions Tax is exempt u/s 10(38) of the I.T. Act, 1961. Once income from particular source is tax free, loss from such a source cannot be set off against income chargeable to tax.
TAX SAVING TIPSa) Basic exemption limit which remained unutilized against other taxable income of the assessee can be adjusted against Capital gains. b) One may rethink whether the transaction in shares is in the nature of Investment so as to yield “Capital gain” or it is in the nature of business so as to yield the income in the nature of “Business Income”. For few, Income from share trading as business income may be more beneficial. All depends upon the facts and circumstances of each individual case.
Query 2]
I am an agent of Post Office, L.I.C.I. & Sahara Para-banking Division. I am doing the business since last seven years. Till date, I have received the T.D.S. Certificates from LICI & Sahara Para-banking divisions only. I haven’t yet received any T.D.S. certificate from Post Office even though I have asked for it in written request. I have a copy of letter by which I have asked for the T.D.S. certificate. Post Office has deducted T.D.S. @ 10% on the commission I am getting. Now my question is how can I claim T.D.S. credit on the business I have done? Next thing is that I want to file my return of all the three agencies at the same time. Is it possible to file the returns of the three agencies at the same time even though I have got the TDS Certificates of two (LIC & Sahara Para-banking) only before June 30 of the current year 2009? Can I file the return of T.D.S. return of the Sahara Para-banking Division of the previous year 2007-2008 along with the return for financial year 2008-2009? Kindly show me the proper and safest path to claim my T.D.S. credit for all above. [aqualai@yahoo.com]
Opinion:
It is one of the most commonly faced problems faced by the assessee whose tax is deducted by the deductor and the certificate remained un-issued despite repetitive requests by the deductee. The only option is either to wait for the deductor to issue the TDS certificate. In the alternative, you may file the return of income showing all your income of the relevant year from all the sources and claiming the entire TDS (from all the three sources) on your income. In support of your claim, you may attach the copy of the letter written by you to the post office for the TDS certificates. You don’t have option to ignore the income from Post office, for any reason whatsoever, while filing the income tax return.
It may further be noted that as per the provision of sub-section (1) of section 203 of the Income Tax Act, 1961 deductor of tax at source (T.D.S) is duty bound to issue a TDS certificate within the prescribed time period to the person whose tax has been deducted. The time limit for issue of T.D.S in most of the cases is one month from the end of the month in which the T.D.S is done by the payer of income [Rule 31(3) of the Income Tax Rules, 1962].
Section 272A (2g) provides for levy of penalty @ Rs 100/- per day for the period of delay if any persons fails to comply with the provision of section 203. So, a person who has deducted tax at source should ensure the issue of T.D.S certificate within the prescribed time period to avoid the penalty provided u/s 272A (2g).
You may make further make a written communication to the deductor clearly mentioning the above provisions of law and delays in number of days. If still payer do not respond and do not issue the T.D.S. certificate, communicate it to the respective C.I.T. (T.D.S. section) stating the facts of the case and praying for issue of direction to the payer for issuance of certificate.
Query 3]
I am a salaried employee. I and my minor daughter both have PPF accounts. I would like to know if I deposit Rs. 70,000/- every year in the account of my daughter besides claiming the allowable exemption in other tax saving instruments of Rs. 1 Lacs in my own case u/s 80C, whether the interest accrued in my daughter's PPF account would be added to my income? [parantap2010@gmail.com]
Opinion:
Minor’s income is required to be clubbed with the income of the parents. However, PPF interest is tax free and will remain so in your hands as well. The deposit in your PPF account and your daughter’s PPF account taken together should not exceed Rs. 70,000/- as per PPF Scheme.
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“SET OFF AND CARRY FORWARD OF CAPITAL GAIN LOSS”
Query 1]
Loss on Sale of shares( held for less than 12 months) i. e. short-term capital loss can de adjusted only against short term capital gains on sale of shares. If net balance is profit, the tax is required to be paid. Any option to save tax? If there is excess loss whether it is carried forward & can be set off against short term/long term capital gains for next year. Please clarify.
For long term capital gains on sale of shares (held for more than 12 months), whether long term capital loss (on sale of share) can be set off? Any avenues to save such tax. Please guide. [nayan.lagad@cosmosbank.in]
Opinion:
“Capital gain” constitutes a separate class in itself in the I.T. Act, 1961 for taxability and set off provision.
The basic rules are: -i) Losses under the head “Capital gains” cannot be set off against income under other heads of income (like salary income etc)ii) Short term capital loss can be set off against any capital gain (be it a short term or a long term). iii) Long term capital loss can be set off against long term capital gain only.iv)The loss, whether long term or short term capital loss, can be carried forward for maximum period of eight assessment years immediately succeeding the assessment year in which the loss is first computed.v) The benefit of carry forward of the loss is available only if the return is filed within DUE DATE of filing the same. (If, however, the return is filed after the due date of filing, the delay may be condoned if a few conditions are satisfied- circular No. 8/2001, dated 16.05.2001).
With above basic idea, it may be noted that1. Short term capital Loss on sale of shares can be adjusted against short term capital gain. It can well be adjusted against the short term capital gain of that year itself or even with the short term capital gain of subsequent years as well. If the net result after set off in any year is profit, tax is required to be paid. 2. Long term capital gain on sale of shares covered by Securities Transactions Tax is exempt u/s 10(38) of the I.T. Act, 1961. Once income from particular source is tax free, loss from such a source cannot be set off against income chargeable to tax.
TAX SAVING TIPSa) Basic exemption limit which remained unutilized against other taxable income of the assessee can be adjusted against Capital gains. b) One may rethink whether the transaction in shares is in the nature of Investment so as to yield “Capital gain” or it is in the nature of business so as to yield the income in the nature of “Business Income”. For few, Income from share trading as business income may be more beneficial. All depends upon the facts and circumstances of each individual case.
Query 2]
I am an agent of Post Office, L.I.C.I. & Sahara Para-banking Division. I am doing the business since last seven years. Till date, I have received the T.D.S. Certificates from LICI & Sahara Para-banking divisions only. I haven’t yet received any T.D.S. certificate from Post Office even though I have asked for it in written request. I have a copy of letter by which I have asked for the T.D.S. certificate. Post Office has deducted T.D.S. @ 10% on the commission I am getting. Now my question is how can I claim T.D.S. credit on the business I have done? Next thing is that I want to file my return of all the three agencies at the same time. Is it possible to file the returns of the three agencies at the same time even though I have got the TDS Certificates of two (LIC & Sahara Para-banking) only before June 30 of the current year 2009? Can I file the return of T.D.S. return of the Sahara Para-banking Division of the previous year 2007-2008 along with the return for financial year 2008-2009? Kindly show me the proper and safest path to claim my T.D.S. credit for all above. [aqualai@yahoo.com]
Opinion:
It is one of the most commonly faced problems faced by the assessee whose tax is deducted by the deductor and the certificate remained un-issued despite repetitive requests by the deductee. The only option is either to wait for the deductor to issue the TDS certificate. In the alternative, you may file the return of income showing all your income of the relevant year from all the sources and claiming the entire TDS (from all the three sources) on your income. In support of your claim, you may attach the copy of the letter written by you to the post office for the TDS certificates. You don’t have option to ignore the income from Post office, for any reason whatsoever, while filing the income tax return.
It may further be noted that as per the provision of sub-section (1) of section 203 of the Income Tax Act, 1961 deductor of tax at source (T.D.S) is duty bound to issue a TDS certificate within the prescribed time period to the person whose tax has been deducted. The time limit for issue of T.D.S in most of the cases is one month from the end of the month in which the T.D.S is done by the payer of income [Rule 31(3) of the Income Tax Rules, 1962].
Section 272A (2g) provides for levy of penalty @ Rs 100/- per day for the period of delay if any persons fails to comply with the provision of section 203. So, a person who has deducted tax at source should ensure the issue of T.D.S certificate within the prescribed time period to avoid the penalty provided u/s 272A (2g).
You may make further make a written communication to the deductor clearly mentioning the above provisions of law and delays in number of days. If still payer do not respond and do not issue the T.D.S. certificate, communicate it to the respective C.I.T. (T.D.S. section) stating the facts of the case and praying for issue of direction to the payer for issuance of certificate.
Query 3]
I am a salaried employee. I and my minor daughter both have PPF accounts. I would like to know if I deposit Rs. 70,000/- every year in the account of my daughter besides claiming the allowable exemption in other tax saving instruments of Rs. 1 Lacs in my own case u/s 80C, whether the interest accrued in my daughter's PPF account would be added to my income? [parantap2010@gmail.com]
Opinion:
Minor’s income is required to be clubbed with the income of the parents. However, PPF interest is tax free and will remain so in your hands as well. The deposit in your PPF account and your daughter’s PPF account taken together should not exceed Rs. 70,000/- as per PPF Scheme.
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