TAX TALK-06.06.2011-THE HITAVADA
TAX TALK-06.06.2011-THE HITAVADA
TAX TALK
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“WHETHER INCOME TAX RETURN FILING IS COMPULSSORY EVEN IF NO TAX IS PAYABLE?”
Query 1]
Sir, Would you clear a few queries arising in our mind regarding filing Income Tax returns this financial year 2010 – 11 i.e., Assessment year 2011 -12:
1. We are senior citizens. Therefore our exemption limit is Rs. 2, 40,000/-
2. We can avail exemption u/s 80C for Rs. 1,20,000 /-
3. Therefore, our total exemption is Rs. 3, 60,000/-
4. We have already paid taxes (TDS& Advance tax) on our income which exceeded the above amount.
Now the queries are:
a. As senior citizens, do we need to file tax returns if we don’t ask for Refund? Is it mandatory?
b. How do we show the proof of depositing Rs. 1,20,000/-to avail the exemption u/s 80C if we don’t submit Returns?
Your advice:
a. Should we file Tax Returns as those may be needed for a foreign trip, to facilitate in obtaining Visa?
b. Is there any change in I/T Rule regarding senior citizens for financial year 2011-12; assessment year 2012-13?
We shall indeed be obliged if you clear these doubts.[rath_sra3848@yahoo.co.in]
Opinion:
1. Filing of income tax return is mandatory for an individual assesee if the total income (i.e., income before deduction of Rs. 1 Lacs u/s 80C & Rs. 20,000/- U/s 80CCF) exceeds the basic exemption limit. Even if the tax on the income is fully paid by way of Advance Tax/ T.D.S, will not give immunity from filing income tax return. Even though the filing is not mandatory if the income is below the basic exemption limit, one can file the return of income voluntarily for records or other purposes.
2. For Senior Citizen, the basic exemption limit has been increased from Rs. 2.40 Lacs to Rs. 2.50 Lacs.
Query 2]
I have invested some of my savings in the 8% Savings (Taxable) Bonds, 2003 of RBI under cumulative option. The interest accrued out of above deposit every year is duly accounted for in the annual tax returns filed by me regularly and appropriate tax is paid. The deposit is due to mature on 12.08.2011. I am informed that TDS at the applicable rate will be deducted from the proceeds at maturity. I have a salary income. Please let me know if I am entitled to submit form No. 15G to claim exemption from TDS on the above deposit at the time of maturity since the tax liability arising was already paid. [umashankar2002@gmail.com]
Opinion:
Declaration in Form 15G (Form No.15H for senior citizen) can be filed by an individual assessee if:
1. the tax on his estimated total Income of the previous year in which such income is to be included in computing the total income will be nil; and
2. Income in respect of such bonds does not exceed the maximum amount which is not chargeable to tax.
So, if both the conditions as mentioned above are satisfied, you can submit the relevant declaration Form for non deduction of T.D.S.
Query 3]
Sir, I sold my house in Nagpur in September 2010 for Rs. 34 Lacs which was purchased by me in October 2003 for Rs. 8.50 Lacs. I have purchased new house at Delhi which is under construction and have paid Rs. 14 Lacs & may be ready within 3 years. All figures are as per agreement signed with concerned parties. My queries are as follows:
1. What will be long term capital gain?
2. How much and up to which time I must invest in LCG account to avoid the Income tax?
3. If the house will not be ready within 3 years, what shall be IT implications? Can I pay the whole amount to builder within 3 years anyway to avoid Income Tax?
Opinion:
The Long Term Capital Gain (LTCG) is required to be calculated by deducting Indexed Cost of Acquisition from the amount of sale consideration. Sale consideration is required to be taken asa] Higher of the sale price as mentioned in the sale deed or
b] Value adopted by the Registrar for the purpose of levy of stamp duty. We have considered the sale consideration at Rs. 34 Lacs assuming it than the stamp duty value of the house is not more than Rs. 34 Lacs.
With above basic principles, the point-wise reply to your queries is as under:
1. The Long Term Capital Gain (LTCG) shall be as under: a) Cost of Acquisition = Rs. 8.50 Lacs (You can further include stamp duty, Registration charges paid for registry etc in the cost of purchase)b) Year of Acquisition = 2003-04c) Cost Inflation Index (CII) for the F.Y. 2003-04 = 463d) Sale consideration = Rs. 34,00,000/-e) Year of Sale/Transfer = 2010-2011f) Cost Inflation index for the F.Y. 2010-11 = 711g) Indexed cost of Acquisition is Rs. 13,05,292/- (Rs. 8.50 Lacs * 711/463)h) Long term capital gain = Rs. 34 Lacs (-) 13.05 Lacs = 20,94,708/-.
2. LTCG tax can be saved by investing the amount of Long term Capital Gain (i.e.,Rs. 20,94,708 in your case) for a] purchase of another house property within a period of 2 years (for construction- 3 years period is permissible) from the date of transfer of the house. In case the amount is not utilized as aforesaid for purchase/ construction before the due date of filing the return of income of the financial year in which transfer took place, the amount is required to be kept in a “Capital Gain Deposit Account Scheme” with a scheduled bank. Since you have already paid Rs. 14 Lacs for purchase of hours property, you may keep Rs. 6,94,708/- in CGDA scheme for capital gain exemption.
3. It appears that you are purchasing (& not constructing) the house property. If it is so then you have to complete the transactions of purchase within 2 years (& not 3 years as mentioned in the query).
TAX TALK
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“WHETHER INCOME TAX RETURN FILING IS COMPULSSORY EVEN IF NO TAX IS PAYABLE?”
Query 1]
Sir, Would you clear a few queries arising in our mind regarding filing Income Tax returns this financial year 2010 – 11 i.e., Assessment year 2011 -12:
1. We are senior citizens. Therefore our exemption limit is Rs. 2, 40,000/-
2. We can avail exemption u/s 80C for Rs. 1,20,000 /-
3. Therefore, our total exemption is Rs. 3, 60,000/-
4. We have already paid taxes (TDS& Advance tax) on our income which exceeded the above amount.
Now the queries are:
a. As senior citizens, do we need to file tax returns if we don’t ask for Refund? Is it mandatory?
b. How do we show the proof of depositing Rs. 1,20,000/-to avail the exemption u/s 80C if we don’t submit Returns?
Your advice:
a. Should we file Tax Returns as those may be needed for a foreign trip, to facilitate in obtaining Visa?
b. Is there any change in I/T Rule regarding senior citizens for financial year 2011-12; assessment year 2012-13?
We shall indeed be obliged if you clear these doubts.[rath_sra3848@yahoo.co.in]
Opinion:
1. Filing of income tax return is mandatory for an individual assesee if the total income (i.e., income before deduction of Rs. 1 Lacs u/s 80C & Rs. 20,000/- U/s 80CCF) exceeds the basic exemption limit. Even if the tax on the income is fully paid by way of Advance Tax/ T.D.S, will not give immunity from filing income tax return. Even though the filing is not mandatory if the income is below the basic exemption limit, one can file the return of income voluntarily for records or other purposes.
2. For Senior Citizen, the basic exemption limit has been increased from Rs. 2.40 Lacs to Rs. 2.50 Lacs.
Query 2]
I have invested some of my savings in the 8% Savings (Taxable) Bonds, 2003 of RBI under cumulative option. The interest accrued out of above deposit every year is duly accounted for in the annual tax returns filed by me regularly and appropriate tax is paid. The deposit is due to mature on 12.08.2011. I am informed that TDS at the applicable rate will be deducted from the proceeds at maturity. I have a salary income. Please let me know if I am entitled to submit form No. 15G to claim exemption from TDS on the above deposit at the time of maturity since the tax liability arising was already paid. [umashankar2002@gmail.com]
Opinion:
Declaration in Form 15G (Form No.15H for senior citizen) can be filed by an individual assessee if:
1. the tax on his estimated total Income of the previous year in which such income is to be included in computing the total income will be nil; and
2. Income in respect of such bonds does not exceed the maximum amount which is not chargeable to tax.
So, if both the conditions as mentioned above are satisfied, you can submit the relevant declaration Form for non deduction of T.D.S.
Query 3]
Sir, I sold my house in Nagpur in September 2010 for Rs. 34 Lacs which was purchased by me in October 2003 for Rs. 8.50 Lacs. I have purchased new house at Delhi which is under construction and have paid Rs. 14 Lacs & may be ready within 3 years. All figures are as per agreement signed with concerned parties. My queries are as follows:
1. What will be long term capital gain?
2. How much and up to which time I must invest in LCG account to avoid the Income tax?
3. If the house will not be ready within 3 years, what shall be IT implications? Can I pay the whole amount to builder within 3 years anyway to avoid Income Tax?
Opinion:
The Long Term Capital Gain (LTCG) is required to be calculated by deducting Indexed Cost of Acquisition from the amount of sale consideration. Sale consideration is required to be taken asa] Higher of the sale price as mentioned in the sale deed or
b] Value adopted by the Registrar for the purpose of levy of stamp duty. We have considered the sale consideration at Rs. 34 Lacs assuming it than the stamp duty value of the house is not more than Rs. 34 Lacs.
With above basic principles, the point-wise reply to your queries is as under:
1. The Long Term Capital Gain (LTCG) shall be as under: a) Cost of Acquisition = Rs. 8.50 Lacs (You can further include stamp duty, Registration charges paid for registry etc in the cost of purchase)b) Year of Acquisition = 2003-04c) Cost Inflation Index (CII) for the F.Y. 2003-04 = 463d) Sale consideration = Rs. 34,00,000/-e) Year of Sale/Transfer = 2010-2011f) Cost Inflation index for the F.Y. 2010-11 = 711g) Indexed cost of Acquisition is Rs. 13,05,292/- (Rs. 8.50 Lacs * 711/463)h) Long term capital gain = Rs. 34 Lacs (-) 13.05 Lacs = 20,94,708/-.
2. LTCG tax can be saved by investing the amount of Long term Capital Gain (i.e.,Rs. 20,94,708 in your case) for a] purchase of another house property within a period of 2 years (for construction- 3 years period is permissible) from the date of transfer of the house. In case the amount is not utilized as aforesaid for purchase/ construction before the due date of filing the return of income of the financial year in which transfer took place, the amount is required to be kept in a “Capital Gain Deposit Account Scheme” with a scheduled bank. Since you have already paid Rs. 14 Lacs for purchase of hours property, you may keep Rs. 6,94,708/- in CGDA scheme for capital gain exemption.
3. It appears that you are purchasing (& not constructing) the house property. If it is so then you have to complete the transactions of purchase within 2 years (& not 3 years as mentioned in the query).
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