TAX TALK-18.04.2011-THE HITAVADA

TAX TALK BY CA. NARESH JAKHOTIA (Chartered Accountant) “INCOME TAX ON SALE OF SHARES & MUTUAL FUNDS” Query 1] I had purchased some shares and Mutual fund a few years back (exact date can not be determined). I have sold these in the previous year 2010-11. Will it attract long- term capital gain tax? Will it be taxable or tax free? Please clarify. [jyti_mhjn@rediffmail.com] Opinion: 1. INCOME ON SALE OF SHARES: - a) For sale within a period of one year from the date of its purchase, the difference between sale price & cost of acquisition would be treated as Short Term Capital Gain in the hands of Investor & would be taxable @ 15% u/s 111A of the I.T. Act-1961.b] For sale after one year from the date of purchase, the difference between sale price & cost of acquisition would be treated as Long Term Capital Gain in the hands of Investor & would be exempt from tax u/s 10(38). 2. INCOME ON SALE OF MUTUAL FUNDS: - The tax treatment of income arising from sale of mutual funds is different for debt funds vis a vis equity fund, as under: i) Debt Fund: a] For sale within one year from the date of its purchase, the difference between sale price & cost of acquisition would be taxable as Short Term Capital Gain in the hands of Investor. It will be taxable like other regular income of the assessee. b] For sale after one year from the date of purchase, the difference between sale price & cost of acquisition would be taxable as Long Term Capital Gain in the hands of Investor & would be taxed at a rate which is lower of the following two: - 10% without indexation or - 20% with indexation benefit ii) Equity Fund: a] For sale within one year from the date of its purchase, the difference between sale price & cost of acquisition would be treated as Short Term Capital Gain in the hands of Investor & would be taxable @ 15% u/s 111A of the I.T. Act-1961.b] For sale after one year from the date of purchase, the difference between sale price & cost of acquisition would be treated as Long Term Capital Gain in the hands of Investor & would be exempt from tax u/s 10(38). Query 2] Sir, I need the following clarification in my case. I had purchased a plot of land in March-1994 & have sold it in December-2010. In January-2011, I have booked a flat for my self for Rs. 43 Lacs & I fulfill the conditions as enumerated for section 54F. I am investing entire Rs. 16 Lacs being the sale proceeds of my land by July -2011. I am a Government servant. I want to know the following: 1. I should seek exemption u/r sec 54 or 54F? Is residential plot included in the definition of residential house property? 2. I should file my return in the new notified (as and when) form ITR-1 or ITR-2 ? 3. If exemption is under 54F then is it necessary to show calculations for indexation in the return, since I have to invest and investing entire sale proceed? [roysoumo@yahoo.co.in] Opinion: 1. You can claim an exemption u/s 54F as you have transferred plot. Exemption u/s 54 is available when the residential house property is transferred. What you are selling is a plot which is a long term capital asset. It doesn’t matter whether it is a commercial plot or a residential plot. You will be eligible for exemption u/s 54F. 2. The new income tax returns forms are recently notified by the Government for the F.Y. 2010-11 (i.e., A.Y. 2011-12). You would be required to file the Income Tax Return in ITR-2. 3. Even though you are investing the entire amount of sale proceeds for purchase of a residential house property & claiming an exemption u/s 54F for the entire amount of long term capital gain, still you are required to show the same in the Income Tax Return. Query 3] I have purchased a Flat on home loan from bank (Rs. 5 Lacs) & a non-refundable advance from my provident Fund (Rs. 2.15 Lacs) in the year 2010. Kindly inform 1. Under which section I can claim tax exemption for the interest which I am loosing by withdrawing the amount from my provident fund? 2. If so, how it is to be calculated? [dhanukakailash50@gmail.com] Opinion: - 1. Deduction towards interest on housing loan is available u/s 24(b) of the Income Tax Act -1961. The same is available only if the interest is payable. In your case, no interest is payable as such on the amount withdrawn from your provident fund A/c. As such, no deduction shall be available on the basis of notional interest amount. 2. Only deduction towards the housing loan availed by you shall be available to you.

Comments

  1. What is share and What is mutual fund? To have a better knowledge on investment, you must know what is difference between shares and mutual funds. Both these financial terms have their own benefits and risks.

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