1. If we make losses while trading of shares within one year, can the loss be carried forward?

·           Loss under the head capital gains can be only set off within the ‘Capital Gains’ head.

·        Short Term Capital Losses are allowed to be set off against both Long Term Gains and Short Term Gains.

·         Can be carried forward for 8 Assessment Years immediately following the Assessment Year in which the loss was first computed.

2. If the shares are held for more than one year, can the losses be carried forward? 

·         Yes, Long Term Capital Loss can be set off only against Long Term Capital Gains. 

·         Can be carried forward for 8 Assessment Years immediately following the Assessment Year in which the loss was first computed.

3. How to set off long term or short- term capital loss made in selling equity/ debt mutual fund?

·         Long Term Capital Loss can be set off only against Long Term Capital Gains for both equity and debt mutual funds

·         Short Term Capital Losses are allowed to be set off against both Long Term Gains and short term Gains on equity and debt mutual fund.

·         Short term for equity mutual funds is 1 year whereas short term for debt mutual funds is 3 years.

·         Can be carried forward for 8 Assessment Years immediately following the Assessment Year in which the loss was first computed.

4. Is maintenance paid on house, part of income from house property?

If maintenance is paid to owner, it will be included in income from house property for the owner. However, if the maintenance is paid directly to the society by the tenant, then it would not be part of income from house property.

5. Will TDS be deducted by broker or MF company on mutual fund gains? Or do we need to declare and file at the time of ITR filing?

·         No tax will be deducted by the mutual fund on capital gains

·         Investor needs to declare and file at the time of ITR

Mutual funds deduct TDS at 10 per cent only on dividend payment.

6. Can we claim tax exemption for land loan?

•          Housing loans are eligible for tax deduction for payment of both interest as well as the principal amount. Land loans do not offer any tax benefit.
•          You can avail tax deductions only if you are constructing a house in the plot. The deduction in that case is applicable only for the loan amount taken against construction, and only after completion of the construction activity, 

7. Is there any tax exemption on sale of immovable property?

Any immovable capital asset held for more than 24 months is considered to be a long-term capital asset.

• One can reinvest the capital gains earned under the following sections and avail the capital gains exemption.

–         Section 54 – Purchase of a new house residential house property

–         Section 54EC – Investment in specified bonds issued by NHAI or by Rural Electrification Corporation Limited or any other bond notified by the Central Government in this behalf 

–         Section 54GB – Equity shares of an eligible start up

8. Under Sec 80D, can we claim senior citizen parents medical bills? What would be the limit?

·         Section 80D of the Income Tax Act allows deduction for medical expenditure incurred on senior citizens. This deduction can be claimed by the senior citizen himself/herself or by his/her children, if the latter are incurring medical expenditure for their senior citizen parents.

·         If individual and parent both are above 60 years, maximum deduction is Rs 1 lakh.

9. Can children’s school fee be claimed to the full amount?

·         Yes, A parent can claim a deduction on the amount paid as tuition fees to a university, college, school or any other educational institution.

·         The maximum deduction on payments made towards tuition fee can be claimed for up to Rs 1.5 lakh together with the deduction with respect to insurance, provident fund, pension etc. in a financial year.

·         The deduction is available to a maximum of 2 children for each individual. Therefore, a maximum of 4 children’s deduction can be claimed, i.e. 2 by each parent.

10. Can I get home loan if the land is owned by me and my sibling?

·         Two brothers can be co-applicants of a home loan only if they live together in the same property. They must be co-owners in the property for which they are taking a home loan.

·          However, a brother and sister cannot be the co-applicants of a home loan.

Similarly, two sisters cannot be co-applicants. 

11. Is the co-applicant borrower clause in Sec 24 applicable in Sec 80C also for repayment of principal?

Yes, same rules apply for Sec 24 and Sec 80C as well.

12. Would gratuity be impacted due to tax regime?

No

13. Would contributions and returns from EPF still continue to be exempt in new tax regime?

Yes

14. Do I have to declare my EPS contribution yearly if corporate contributes for it?

You need to only show EPF contribution based on Form 16 issued by employer.

15. Can I claim Sec 24 on two properties?

Yes, you can. 

16. Will LTA be taxable in old regime if I do not submit bills?

The part of LTA for which you are not able to produce bills would be taxable.

 

17. I am staying in one city but have a property in another city. Can I claim both HRA and Sec 24?

 

Yes

18. My parents are staying in one city and I am paying rent for them. I am staying in another city on rent. Can I claim deduction towards the rent I pay towards both properties?

No, you can claim deduction on rent only for the property that you are residing in.

 

 

19. Can I claim for premium paid towards top up plan under Sec 80D?

Yes, you can.

20. Will contributions made towards PM Cares Fund be claimed under Sec 80G?

Yes.

21. If OC is given but property is not registered, can one claim Sec 24 benefits?

Yes, one can claim Sec 24 benefits after getting Occupation certificate even if the house has not yet been registered. 

22. Can one claim under Sec 80D for health insurance and under Sec 80DDB?

One can claim under Sec 80DDB up to a maximum of Rs 40,000/-. But remember the amount claim will be reduced by the amount received from an insurer or reimbursed by employer for medical treatment of such person.

23. Is FD interest included in Sec TTA?

No, only interest from savings account is included in Sec TTA. 

 

24. Can an NRI who has inherited some agricultural land sell the land, and what are the tax implications?

NRI’s can’t own agricultural land in India but may acquire it through inheritance from a resident of India. The NRI can sell the land only to a person who is a resident of India. As per exchange control rules, a maximum remittance of $1 million per financial year is only permitted from sale of an agricultural land from NRO account.

No income tax is levied upon inheritance and sale of agricultural land in India unless the agricultural land is situated in or within the periphery of certain specified urban areas such as urban agricultural land.

25. Can I claim monthly maintenance as part of rent paid?

No, maintenance paid to society can not claimed as part of rent paid. Only the amount paid to the owner as rent qualifies to be claimed as rent.

26. Can i claim rent paid by me for my son who lives in another city under my HRA?

No, you can claim HRA only for the rent on the house that you live in.

27. I plan to renovate two of my houses – one where I live and one which is let out by taking a loan. Will I get any tax deductions for the repairs?

On the home which is let out, you can deduct a notional standard deduction of 30% of annual rental value (rent received minus actual taxes paid). Also you can offset the interest paid on loan taken for acquiring, construction or renovation against the rental income.

For self-occupied property, only a deduction of interest on a loan availed of for acquiring, constructing, repairing, renewal or reconstruction can be claimed, subject to the prescribed limits. However, if you choose new tax regime as per Budget 2020, no deduction towards interest payment on a self-occupied property or loss from a house property can be claimed as deduction from financial year 2020-21.

28. Can I claim deduction under Sec 24 for interest component on my home loan for my property if the property is not yet registered? I do have the Occupancy Certificate for the property.

Yes, you can claim deduction under Sec 24 for interest paid on home loan if you have occupancy certificate.

29. In a real estate sale transaction, am I allowed to deduct brokerage from the selling price while determining the capital gains? What documentation proof do I require to show brokerage amount paid?

Yes, you can deduct the brokerage charges while calculating the capital gains but need to provide the proof of payments made to the broker.

30. I am a senior citizen getting pension but don’t have any insurance policy. Can I include amount paid for different test reports and registration fee of hospital to claim the Rs 50,000/- deduction under Sec 80D? For how long should I preserve the bills and receipts?

As per Section 80D of the Income Tax Act, any amount paid towards medical expenditure on the health of a senior citizen (aged 60 years or above) is allowable as a deduction, up to a maximum of ₹50,000. But no amount should have been paid to keep in force any health insurance for the said senior citizen.

Further, such payment should have been paid by any mode other than cash.

Medical expenses incurred for doctor’s consultation fees, medicines, diagnostic tests, etc, qualify for claiming the deduction benefit under Section 80D.

It is recommended to maintain the supporting documents for a period of two years. Maximum time period for retention of documents can be regarded as seven years.

31. I received Rs 1 lakh from an insurance policy after 1% TDS cut. Do I have to show this amount in my Income Tax return and do I have to pay tax on the same?

Kindly check the premium amount paid and policy issue date of your policy. When premium paid on a policy exceeds 10% of sum assured for policies issued after 1^st April 2012 and 20% of sum assured for policies issued after 1^st April 2012, any amount received on maturity of a life insurance policy is fully taxable.

You need to disclose the amount received under the head “Income from other sources” and pay tax according to your income tax slab.

32. Equity dividend was tax free in the hands of an individual up to Rs 10 lakhs. So if investor opts for old tax regime for financial year 20-21, will equity dividend be tax free?

Any dividend received by you in financial year 21 is taxable in investor’s hands at the applicable rates.

33. I jointly own a house with my wife, which is rented out. How much of the rent received should I show in my income tax returns?

Rental income earned from jointly owned property is taxable in the hands of each co-owner in proportion of the share in property. This amount would have to be disclosed in each of your income tax returns separately. 

34. I received an amount of Rs 20 lakhs as gift from my father for my marriage. Would this amount be taxable?

Any sum of money received from a relative or on the occasion of marriage, or under a Will or by way of inheritance would not be taxable in the hands of the recipient.

35. My employer has deducted TDS but has not deposited it. What do we do?

Obtain Form 16A (TDS certificate issued by deductor) and verify it with Form 26AS. Bring any mismatch to the notice of the deductor and ask them to get the return rectified. However if you have proof of tax deducted like TDS certificate, you need not worry. As per Section 205, if tax has already been deducted, then taxpayer cannot be called upon to pay tax  to the extent to which tax has already been deducted from that income. 

36. I am an NRI but I have a property in India for which I receive rent. Am I supposed to pay tax on the rent received?

Yes, you are required to pay income tax on the rent received in India. 

37. I received amount worth Rs 5 lakhs after my father sold his ancestral property. Should I declare this income in my Income Tax return and do I pay tax on this?

Any amount of money received as inheritance or part of Will is fully exempt from tax. However it would have to be declared in the Income Tax return under the schedule “Exempt Income” in Income Tax return form. 

38. I sold my house recently and have long term capital gains. Can I purchase an agricultural land and show the expense to claim tax exemption?

No, you can not claim exemption from long term capital gains tax for expenses towards reinvestment in an agricultural land. 

39. If an NRI has one house in India but the same is locked and no income from the same. The only other source of income is interest from banks which is less than Rs 2.5 lakhs. Is the NRI required to file income tax returns?

No, the NRI need not file Income Tax returns if he does not have taxable income to the amount not chargeable in India (less than Rs 2.5 lakhs) and if he/she is not covered under specified conditions which are: 

a) Has deposited an amount of Rs 1 crore or above in one or more current accounts maintained with a banking company or a co-operative bank.

b) Has incurred an expenditure of an amount exceeding Rs 2 lakhs for himself or any other person for travel to a foreign country.

c) Has incurred an expenditure of an amount exceeding Rs 1 lakh towards the consumption of electricity.

40. I receive annuity installment per month from my company’s superannuation scheme. Can I get a refund on the tax I have paid for the last 10 years on this amount?

No, the Section 10(13) grants exemption from tax in case payment is received from an approved superannuation fund by an employee in lieu of or in commutation of annuity on his retirement. However, annuity received from superannuation fund of LIC is taxable under the head “Salary”. 

41. The house where we stay is in my wife’s name. Can I pay rent to her and claim HRA benefit? 

Exemption of HRA is not available if employee resides in his own house or does not incur any expenditure on payment of rent. Hence payment of rent to close relatives will not be considered legitimate unless there is substansive documentary evidence to prove it. 

42. I have made capital gains by selling a property. I am building another house by taking a home loan. Can I claim any deductions on the capital gains on sale of property?

Since you are purchasing another house on sale of property, you are entitled to deduction under Sec 54 of the Income Tax Act. Capital gains, to the extent invested in the new house can be claimed as deduction. 

43. I pay insurance premium for my daughter where she is the insured person and I am the proposer. She is also employed and earns an income. Am I eligible for tax benefits as a proposer?

Any sum paid by an individual in the financial year towards insurance on the life of any child of the individual is eligible for claiming deduction. Hence you are eligible to claim deduction under Sec 80C for the life insurance premium paid by you for your daughter.

44. Registration of flat was done later but it was rented out earlier after possession. Payment made to builder was higher than rent received. Does rental income received have to be declared and can it be offset against payment towards cost to the builder?

You would be considered the owner of the property from the date of receipt or possession of the property. So even if the registration is done later, the income shall be taxable as rental income from the date of possession.

Only specified deductions like municipal taxes, standard deduction of 30% of net rent received and interest on housing loan can be claimed against the rental income received. Deduction for amount paid to the builder is not available as a deduction against the taxable rental income.

45. While purchasing a property and making the agreement, I got to know that the owner is an NRI. Few days later, they said they are returning to India permanently. What would be the TDS amount on sale of property? What documents do I collect from the seller to safeguard my interest?

As per Income Tax Act of 1961, the buyer of an immovable property is supposed to deduct TDS at the time of making payment to the seller. If the seller is a resident of India, TDS @1% is to be deducted if the sale consideration is Rs 50 lacs or more. If the seller is an NRI, TDS needs to be deducted at the applicable tax rates on the taxable income.

It would be advisable if you obtain a written declaration/affidavit (preferably a chartered accountant’s certificate) from the seller that they would be permanently relocating to India and that they would qualify as resident of India from tax perspective for the financial year in which the sale occured. The onus of verifying all documents and paying tax accordingly lies with the buyer of the property.

46. I pay some amount of rent in cash. Can I show this for availing House Rent Allowance (HRA)?

As long as the rent agreement is in your name and the total amount paid (whether in cash or cheque) is mentioned, you can claim it in HRA.

47. I have a home loan for which I claim tax exemption as self occupied. I stay on rent and do not claim any HRA. Do I have to mention the address of my flat in my ITR form?

ITR forms from AY 2020-21 are exhaustive and seek more details from tax payers.  The forms mandate furnishing the address of the house property whether self-occupied or let out.

48. Do I need to pay tax on gift received by selling ancestral property?

Any sum of money received from the relatives as gift or under a will or by inheritance is fully exempt from tax in the hands of the beneficiary.

However the exempt gift amount needs to be disclosed under the schedule “Exempt Income” in the ITR.

49. Does NSC amount on maturity fall under taxable income and does it have to be shown in ITR?

The accumulated interest, on maturity is taxable under head “Other Sources” and the income has to be disclosed in “Schedule OS” in the ITR form.

50. Which ITR form should  i file for income from consultancy work?

You need to use ITR 4 for the same.

51. Should I pay advance tax at periodic intervals or make a single payment towards income in March?

If your estimated tax liability exceeds Rs 10,000 for a financial year, then you are liable to pay advance tax by the due date prescribed.

Resident senior citizens, without any income from income or profession, are exempt from paying advance tax and can pay taxes at the time of filing returns by 31st July, after the end of the financial year.

52. How can I reduce tax to be paid on capital gains made by selling property?

You can invest the capital gains amount or Rs 50 lakhs, whichever is lower, in Sec 54EC bonds within 6 months from the date of sale to get exemption from capital gains tax from sale of flat. These bonds have a minimum lock-in period of 5 years and the interest is taxable.

If capital gains are not reinvested, you need to pay tax at 20.8% of the capital gains amount.

53. How can I calculate capital gains on sale of property?

You should know the fair market value of your flat as on 1st Apr 2001. This value needs to be multiplied by the CII of the year of sale. This would give the cost price.

Capital Gains = (Selling price) – (Cost price) – (Transfer expenses and any cost of improvement).

54. Due to delay in construction of property, I received refund from the builder. How will this amount be treated for tax purposes?

Refund of amount paid by you will not have any tax implications. Regarding the interest received, it will be taxable under the head “Income from other sources” in the proportion of contributions made by each owner. Compensation received over and above the booking amount will be taxable based on the terms and conditions mentioned in the document under which the said amount will be received.

55. What is gross total income?

Total income of an individual from all sources of income like salary, income from house property, etc. is the gross total income.

56. What is the difference between total income and gross total income?

Gross total income is the total income of an individual from all sources of income.
From the gross total income, certain deductions can be made under various sections like Sec 80C, 80D, etc. The amount arrived at after deducting deductions is called total income or taxable income.
Total Income = (Gross total income) – (Deductions permitted)

57. Can I claim deduction for my personal and household expenditures while calculating my taxable income?

No, deductions can be claimed only for those expenses which are provided under the Income Tax Act.

58. My son has a property in India but he stays abroad. He has asked the tenants to pay the rent to me. Is he still liable to pay tax?

Rental income from house property is charged to tax in the hands of the owner. As your son is the owner of the property, he is liable to pay tax on the same even though you receive the rent on his behalf.

59. What is rebate under Sec 87A for FY 2019-20?

The rebate under Sec 87A has been revised to Rs 12,500/- for FY 2019-20, i.e, Assessment year 2020-21.

60. Can a partnership firm or HUF claim rebate under Sec 87A?

Rebate under Sec 87A is available only to individuals. Hence any person other than individual cannot claim rebate under Sec 87A.

61. Is it necessary to attach documents with Income Tax return?

No document, be it proof of investment, TDS certificate, etc. needs to be attached along with the ITR. However, these documents need to be retained by the taxpayer and produced before the tax authorities when demanded, like during assessment, inquiry, etc.

62. If I have paid excess tax, will it be refunded to me? How?

The excess tax paid can be claimed as refund while filing IT returns. Once your return has been processed and if the ITR department accepts your refund claim, the refund amount would be electronically credited into your bank account.

63. For a real estate sale transaction, am I allowed to deduct brokerage from the selling price while determining the capital gains?

Yes, you can deduct brokerage charges from the selling price of the property but you need to provide necessary proof of payment to the broker.

64. Is maintenance paid on house, part of income from house property?

If maintenance is paid to owner, it will be included in income from house property for the owner. However, if the maintenance is paid directly to the society by the tenant, then it would not be part of income from house property.

65. Is the co-applicant borrower clause in Sec 24 applicable in Sec 80C also for repayment of principal?

Yes, same rules apply for Sec 24 and Sec 80C as well. 

66. If OC is given but property is not registered, can one claim Sec 24 benefits?

Yes, one can claim Sec 24 benefits after getting Occupation certificate even if the house has not yet been registered. 

67. For a real estate sale transaction, am I allowed to deduct brokerage from the selling price while determining the capital gains?

Yes, you can deduct brokerage charges from the selling price of the property, but you need to provide necessary proof of payment to the broker.

68. Does a plot loan have tax exemptions?

Plot loans do not offer tax benefits like home loans. Only for construction of house in the same plot, one could avail tax deduction. Tax deduction is applicable only on the loan amount availed for the purpose of construction.

69. Can you please explain the tax implications of EPF/VPF and NPS in the New tax regime?

Employee contributions of up to 12% of basic to EPF qualifies for tax deduction under Sec 80C. However, from April 2021, if employee contribution towards EPF and VPF exceeds Rs 2.5 lakhs in a financial year, then the interest earned on contributions above Rs 2.5 lakhs will be taxable. For employees whose employer is contributing to NPS account, income tax deduction of 10% of salary (basic + DA) is available under Sec 80CCD (2) even in new tax regime.

70. Apart from 50k, do we get additional benefit of 10% employer contribution?

Employer’s NPS contribution up to 10% of salary (Basic + DA), is deductible from taxable income under Sec 80 CCD (2) of Income Tax Act.

71. Can we claim interest for under construction property?

Interest paid on home loan can be claimed only after possession. Interest paid before possession can be claimed in 5 instalments beginning from the year in which construction was completed, subject to a maximum of Rs 2 lakhs per year if the property is self-occupied.

72. Can I claim LTA at the year end, if I hadn’t opted for LTA in the year starting?

You cannot claim LTA in every financial year. LTA can be claimed only for two journeys in a block of 4 years.

73. Can we claim for medicines of parents (senior citizen) in 80D, if parents are covered only in company health insurance and not in any other insurance?

You can claim deduction for medicines for senior citizens but only if they are not covered under any other health insurance policy.

74. Term insurance are part of which section?

Premiums for term insurance can be claimed under Sec 80C.

75. What if we have taken home loan and possession is next year, can we claim loss on housing property and HRA both?

One can claim Sec 24 only after possession of the house.

76. Can ITR-1 be used for cases where RSU is held but not sold and no gains made?

Yes, as it is considered at unlisted shares held.

77. Does 80D covers only medical insurance or it cover Life insurance also?

It covers only health insurance.

78. From where do we need to obtain certificate for disabilities and is it mandatory?

Yes, it is mandatory to obtain certificate from prescribed medical authority.

79. Can one claim parents full body check-up or medicines under 80D?

One can claim expenses for medicines for parents (senior citizens) under Sec 80D provided they are not covered under any other health insurance policy. Medical check-up can be claimed up to a maximum of Rs 5000/- in a financial year.

80. If a person staying in city A and the dependent parents are staying in city B. can we claim HRA for that rent (city B) which we are paying for them?

No, you cannot. You can claim HRA only for rent on flat where you reside.

81. Is tax for RSU be considered for the invested year or withdrawal year?

Tax for RSU is considered in the year that it gets vested and then sold.

82. If I have a running Pre- EMI on house loan and possession is in current FY. Should I wait till next FY or can I do the declaration now itself?

You can claim deductions only once you receive possession of the house.

83. I trade in share market, is LTCG applicable?

Yes, it would be applicable if you make long term capital gains.

84. Can I go with new regime for 1 year and switch to old regime for the next year?

If you have income from business, you cannot. Else, yes you can switch from new tax regime to old tax regime in the next financial year.

85. Can we avail house loan interest benefits for two properties under sec 24?

Yes, under old tax regime you can avail deduction on interest component on loan for both houses but the maximum loss from house property can be up to Rs 2 lakhs.

86. Does VPF earn interest on the principal only, or on the principal +interest for the previous years?

Yes, VPF earn interest on Principal + interest for previous years.

87. Is section 80G applicable on new tax regime?

No, it is not applicable under new tax regime. However, donations to only the authorized PM Cares Fund are legible for deduction under Sec 80G if donation made before 30th June 2020.

88. For a real estate sale transaction, I’m I allowed to deduct brokerage from the selling price while determining the capital gains?

Yes, you can deduct brokerage charges from the selling price of the property, but you need to provide necessary proof of payment to the broker.

89. I hold shares a company which has gone into liquidation. The shares cannot be sold in the market. Can I claim capital loss in my income tax statement? If so, how?

As per section 2(47) of the Income Tax Act, 1961, transfer, in relation to a capital asset, includes the sale, exchange or extinguishment of any rights. In the event the company has gone into liquidation, you have to report the capital loss (if any) in your tax return. Please note that depending on the period of holding, this capital loss could be either long-term or short-term. While short-term capital loss can be set off against any gains (long-term and short-term); long-term capital loss can be adjusted only against long-term capital gain. In case you have any unadjusted loss, then it can be carried forward for set off for the next eight tax years.

 90. I am a 75-year-old senior citizen and sold part of my inherited property (land) last month. Is there a ₹3-lakh reduction in long-term capital gains (LTCG) on sale of land for senior citizens aged 60-80 years? Is it for seniors with taxable income less than ₹3 lakh in the taxation year? If so, is the ₹3-lakh limit reached after various concessions under Section 80-C to 80-U?

Under the income tax regulations, the basic exemption limit applicable for senior citizens aged between 60 and 80 years is ₹3 lakh. As per section 112 of the Act, a resident assessee, whose total income before considering long-term capital gains is below the basic exemption limit, can offset the long-term capital gains (LTCG) against the balance basic exemption limit that’s available. If you don’t have any other income, then the entire ₹3 lakh of basic exemption limit can be adjusted against your capital gains. However, deductions under chapter VI A (section 80 C to 80 U) cannot be claimed against such LTCG.

91. I am a senior citizen, aged 62 years, from Chennai, but currently employed out of India. I am a bonafide NRI as on date and will be so during the financial year ending March 2022. Currently, I don’t have any fixed income from any source within India except for insignificant interest from NRO savings accounts, and dividends from shares. I am an NRI in a country (UAE) where there is no income tax. My net NRO capital gains for the FY ending March 31, 2022, will be less than ₹2.5 lakh. I don’t have any other source of Income in India. Are such people required to file ITR? I have not filed my ITR since 2007, in which year I became an NRI, as my capital gains for these years have been lesser than ₹ 2.5 lakh each year. Will there be any penalty for not having formally filed ITR? How to check with IT department about this?

Please be advised that every individual has to file the return of income if his total income (including income of any other person in respect of which he is assessable) exceeds the maximum amount which is not chargeable to tax i.e., exceeds the exemption limit, currently ₹3 lakh for resident senior citizens (individual above 60 but below 80 years of age). Further, an NRI, with income below the exemption limit, may still be required to file the return of income, if such taxpayer:

• has deposited an amount (or aggregate of amount) exceeding ₹1 crore in one or more current accounts maintained with a banking company or a co-operative bank. 

• has incurred more than ₹ 2 lakh on travel to a foreign country, either for himself or for any other person. 

• has incurred an expenditure exceeding ₹1 lakh on electricity consumption.

I understand that you qualify as non-resident in India as per the provisions of the Income-tax Act, 1961. Hence, in case your taxable income is below the threshold limit i.e., ₹3 lakh and if the conditions mentioned above are not applicable to you (for FY 2021-22), you would not be mandatorily required to file ITR. 

Further in case your taxable income in the previous year was less than the basic exemption limit for FY and any other exceptions as may be prescribed for relevant FYs are not applicable, there would be no requirement to the ITR mandatorily. Hence, no penalty can be levied.

92. Kindly clarify on the applicability of grandfathering of capital gains pertaining to the purchase of shares in physical form through transfer deed form. Subsequently, shares were dematerialised during 2009. The same company issued bonus shares in the year 2017. Now, I would like to sell the above shares. Also, advise the applicability of tax rate. 

 

The shares are held by you in Demat form (converted from physical form). The benefit of grandfathering u/s 112A is applicable on transfer of equity shares acquired before 01 February 2018 on which STT is paid both at the time of purchase and sale of equity shares. However, Central government through notification has specifically excluded purchases done before October 1, 2004 from chargeability of STT. 

Hence, in case the shares are purchased on or before October 1, 2004, the provisions of grandfathering would be applicable even if STT is not paid at the time of acquisition of shares. However, in case the shares are purchased after October 1, 2004, the provisions of grandfathering would be applicable only when STT has been paid on such transactions.

Bonus shares: As per the provisions of section 55 of the Act, where an individual is allotted any additional financial asset without any payment (i.e. bonus shares), cost of acquisition for the bonus shares would be considered as FMV if allotted prior to April 1, 2001 and NIL if allotted post April 1, 2001. Further, if such shares are allotted on or before January 31, 2018 then grandfathering benefit is available if STT is paid on transfer of shares at the time of sale. Since these shares are listed in India and traded on a recognised stock exchange, same would be eligible for benefit of grandfathering provisions and LTCG for these shares shall be calculated by considering such grandfathering provisions.

Tax rate: Long-Term capital gains on sale of equity shares (i.e. held for a period exceeding 12 months), shall be chargeable to tax at 10 per cent without the benefit of indexation on gains exceeding ₹1 lakh.

93. I am planning to sell a plot in the name of three brothers and use it in the construction of a residential house. The house plot is in the name of two brothers. How to avail tax benefits by utilising the sale proceeds in construction of residential house? Is there any way to get tax break for the third brother if his share also invested in the house property?

Section 54F of the Act provides for deduction while computing taxable capital gains arising from sale of long-term capital assets other than residential house property. Certain conditions are attached for claiming this deduction. Some of them are:

a. The residential house should be constructed in India either one year before the date of transfer of plot or within three years after the said date.

b. Net sale consideration from sale of long-term capital assets (Plot) is invested in purchase/ construction of a residential house. 

c. The new residential house should not be transferred within a period of 3 years from the date of its acquisition / construction.

d. The individual claiming the deduction should not own more than one residential property apart from the new property at the time of selling the plot.

Deduction is not available if the individual purchases a third property within a period of two years after the date of transfer of plot (or) constructed within a period of three years after the date of transfer of plot other that this new property. If the conditions are not fulfilled then, capital gains deduction referred above is taxable in the year in which the conditions are breached. 

An individual may not be able to get a tax benefit on sale of plot unless the investment in new asset is also done in his name. In this case, since the 3rd brother does not own the plot on which house is going to be constructed, he’ll not be able to get section 54F deduction. However, he can still explore deduction under section 54EC wherein he can invest up to ₹50 lakh on prescribed bonds within six months from the date of sale.

 

94. Mr. X was allotted a flat in a group housing society in Jan-2001. He sold the flat in FY2021-22 and there is capital gain out of this sale and the amount is available with him in capital gain account scheme. He is planning to sell another flat within a year where he may have long term capital loss. Can he adjust capital loss arising out of sale of second property from the gain of his first property lying in his capital gain account and pay tax only for the balance amount?

Section 74 of Income tax Act, 1961 allows setting off of long term capital losses against long term capital gains. Unadjusted loss can be carried forward for setting off. However, roll back of capital loss incurred for example in year 2 against the long term capital gains in year 1 is not permitted. You can adjust in the future and not the past. Therefore, in your case, you would not be able to adjust the gain from sale of your first property (lying in capital gains accounts scheme) against the loss that you may incur on sale of the second flat.

 

95. I am Mr. X my son will turn 18 in july this year. I intend to apply for a pan card and, subsequently , open a bank account, demat an trading accounts, as well as a PPF account, for him. As he still a student and not earning, these accounts will be funded by gifts from us, his parents. what would be the tax implication of these transactions ? Will any clubbing provisions apply in  this case?

 

As per Section 56(2)(x) of the Income Tax Act, 1961, any amount that is received by a person from his or her ‘relative’ is considered a gift and is not subject to income tax, irrespective of the amount that has been received from the relative. Since you, as a parents, fall under the ambit of the definition of a ‘relative’, any amount received by your own son from you will not be charge able tax.

You have mentioned that your son will soon turn 18 and that you will be opening a bank account, demat account and a PPF account for him by using your own funds, The funds that are used to open the above mentioned accounts shall also be considered gifts and, hence, shall not be chargeable to tax in the hand of your son, irrespective of the amount used to open the accounts.

Regarding clubbing provisions, only the income of a minor child (below the age of 18 years)is clubbed and is taxable in the hands of the parent whose income is more. However, this does no t hold for an adult child. So. any income of your son on becoming a major will not be clubbed with your income and shall be assessed separately in the hands of your son at the applicable tax slab rates, respectively. He Will also have to file a separate income tac return in such  a case.

96. Mr. X sold a 3-BHK flat in september 2015 and invested the proceeds in a new flat. In march this year, Mr. X  sold the ancestral property-an apartment- and bought some land with intention to construct a house thereon. How will Mr. X be

able to take advantage of the long-term capital gains (LTCG)?

 

It is assumed that you are the owner of the ancestral flat, being a residential house property held for more than 24 months (including the period of holding by the previous owner) before is sale. The sale of such ancestral flat (original asset) would be considered as a sale of long-term capital asset and liable to be taxed  as LTCG in your hands.

As per provisions of the Income-tax Act, deduction against LTCG on sale of residential house property is available, where the reinvestment of LTCG is done for construction of a residential house property or purchase of a residential house property in India, subject to other specified timelines and conditions, Such purchase or construction of residential house property can be done either one year before the  date of sale of original asset or within two years (in case of purchase)/three years (in case of construction) after sale of the original asset, respectively.

Based on available judicial precedents and circulars issued by the tax department, investment in purchase of pot of land for construction of a house property may entitle a taxpayer to claim deduction under section 54 of the act subject to prescribed conditions. Since you plan to construct a residential house thereon is completed within three years from the date of sale/ transfer of the original asset, i.e. ancestral flat. Any LTCG amount that remains uninvested up to the due date of filling the tax return would need to be deposited by you under the prescribed Capital Gains Account Scheme and utilized as per the conditions prescribed.

please note that you would not be eligible for an exemption if you choose to only purchase a plot of land (without construction of residential house property thereon within the prescribed timelines ) and in such case you would be liable for tax on the LTCG, as applicable, in the financial year in the timeline of three year expires.

 

  

97. Mr. X worked for a few years in the USA, Where X employer provided the 401(K) account. Now, I am a resident Indian. However, I still maintain that account want to know whether I have to declare this in my Income tax return (ITR)?

 

Based on the limited information provided by you, its is presutiled that your an Indian citizen and qualify as Resident and ordinarly resident and ordinarly resident and this you are requried to disclose the details in ITR-2 of all your foreign.

foreign asset (FA) schedule in the ITR from seeks to incorporate the details of assets which a taxpayer holds outside India. In the absence of any specific guidelines qua asset, Whether an asset is to be included or not will need to be evaluated basic the enatre and vesting of the asset, wordings and description in the schedule and the limited instructions guidelines in this regards.

It is assumed that the 401(k) account is a personal pension account in the US in which both the employer and employee contribute during the period to disclose the detail of the 401(k) account inn the FA schedule.

with respect t the specific section of the FA schedule under which its should be disclosed, it would depend upon the exact nature of the 401(k) account, which will need to be evaluated. In case of the nature of account does not fall into any specific category, one may consider reporting it under  the residual section D- any other capital asset as per the ITR-2 from applicable.

 

 98. Mr. X son is in canada as a permanent resident.He is gainfully employed and pays his taxes there. I want to transfer some amount to his NRO account in india. He can file his tax return for this income (which will be non-taxable as he transfer is from Mr. X to son), in india , along with any other income received during the financial year, and pay taxes here, if any. he can then remit the net amount to his account in canada. In such a case, will the net amount repatriated to canada be taxable there as it been declared in the returns in india and taxes have been paid? India and canada are signatories to a Double Taxation Avoidance Agreement.

 

  The repatriation of money outside India requires one to submit From 15CA, From 15CB & A2. This certifies that if the amount transferred is tax-deductible, then adequate tax has been deducted and paid. In canada, only interest income earned on the amount transferred, or any other income received during the fiscal year (as mentioned), is subject to tax, for which you can claim tax credit under DTAA there.

99. Flat purchase in Mr. X wife’s name: Can Mr. X save tax on capital gains and rental income?

Income Tax rules for property purchased in wife’s name: Tax liability arises when you sell a flat at a higher price or when you rent it out to a tenant. In the hope of reducing such tax liability, many people tend to buy a house property in the name of their spouses. However, this trick to save tax doesn’t work as per the rules.

Transferring money to the wife’s bank account to buy a flat in her name doesn’t give the husband any freedom from the capital gains tax liability arising after the sale of such property or the tax liability on income earned by renting it. Transferring the ownership of the flat to one’s spouse also doesn’t absolve the person from tax liability. Let us understand this with two situations:

First, when the property is transferred to wife’s name without consideration

When an individual transfers a house property to his spouse without adequate consideration (or receiving money in lieu of such transfer) then such individual is deemed to be the owner of transferred property under Income Tax rules.

“Section 27 of the Income Tax Act provides that an individual transferring any house property without adequate consideration to their spouse shall deemed to be the owner of the house property so transferred,”

Also, any rental income or capital gains arising out of such transferred property is taxed in the hand of the deemed owner.

“Any rental income or capital gains derived from such house property shall be taxable in the hands of such individual/deemed owner,” .

Second, when an individual transfers money to his wife’s account and uses it to buy a flat in her name.

Suppose a man sends money to his wife’s account and buys a flat with that money in her name by making all payments from her account. In this case, the expert says that the transfer is of money and not the house property. Therefore, the clubbing provision under section 64 of the Income Tax would be applicable. Any income arising from the sale of such property or by renting it would be subject to tax in the hands of the husband.

“In the given case, the transfer being made is of money and not house property and as such the clubbing provisions u/s 64 would be applicable as opposed to the provisions of deemed ownership u/s 27 of the IT Act,” 

“Even the Gujarat High Court in the case of Thakar (KD) vs CIT (1979) 120 ITR 190 (Guj) provided that where the property transferred is not a house property but a cash amount from which the wife of the assesssee purchased the house, it was held, it could not be said that the transferor could be a fictional owner u/s 27(i) of the IT Act,” he adds.

According to the expert, rental income and capital gains arising from such house property would be subject to tax in the hands of the transferor (similar to the provisions of Section 27).

When the above will not apply?

Provisions of Section 27 section will not apply if the transfer of house property is made against adequate consideration or in connection with an agreement to live apart.

100. Mr, X. daughter is studying abroad. She is reaching the end of her course and may need some funds during the interim period before she finds a job. She may require the rupee equivalent of $10,000. Is Mr, X. allowed to send so much money to her and what will be the tax implications thereof on both her and to Mr, X?

The amount that you intend to remit can be treated as a gift made by you to your daughter. As per Section 56 of the Income Tax Act, the value of gifts received is not taxable in the hands of the recipient as long as the aggregate value of all the gifts received during the financial year does not exceed fifty thousand rupees. Once the aggregate of gifts received exceeds the threshold of fifty thousand rupees in a financial year the full value of all the gifts are treated as income of the recipient. However, gifts received from certain specified relatives are not treated as income irrespective of the amount. Father is included in the definition of specified relatives and thus it will not be treated as her income.

This transaction also does not have any tax implications for you. RBI allows every resident Indian to remit up to  2.5 lakh $ every year under the Liberalised Remittance Scheme (LRS) for specified purposes including for maintenance of your relatives.

You need to approach your bank for this purpose and they will help you with the procedure to be followed for remittance of money to your daughters abroad. The latest budget has proposed tax collection for remittance made under LRS and therefore the bank may collect additional money as TCS (Tax Collection at Source) which you will be able to claim against your tax liability while filing your ITR next year.

101. Is it compulsory for a non-resident Indian (NRI) to file income tax return (ITR) every year in India despite not having any income in India?

According to Indian tax laws, any person whose income exceeds the maximum amount not chargeable to tax (i.e. ₹2.5 lakh under the old tax regime; ₹3 lakh under the new tax regime) during the financial year, is required to file an ITR in India. Therefore, you are not obliged to file returns if you do not have any income in India

Though there is no requirement to file the ITR, certain high-value transactions are required to be captured and reported by a reporting entity even though these transactions may not have any connection with income. Certain examples are: investing a sum of more than ₹10 lakh in non-residential external (NRE), non-resident ordinary (NRO ) or FCNR (foreign current non-resident account) fixed deposits (FDs) or subscribing to shares of an Indian company or mutual funds for more than that sum; acquiring an immovable property in India for more than ₹30 lakh. In such cases, the tax department may seek to confirm the transactions and a response has to be filed diligently without which it may eventually result in issuance of a reassessment notice.

102. Mr, X. is buying a new house and moving there. He wants to sell his existing house but he is not able to get a buyer. He took a home loan for the new residential house, and pay it off when he sells his present flat. Will he be able to get a capital gains exemption for payment of the home loan taken to buy the new house?

In order to save tax on long-term gains on the sale of a residential house property, you have to invest the amount of indexed capital gain either in another residential house or in capital gain bonds of specified financial institutions. The investment in a residential house has to be made within two years from the date of sale of the property. Even if you sell the residential house property within one year from the purchase of another residential house, you can still claim capital gains exemption to the extent of indexed capital gains or the value of the house property bought earlier which is lower. If you get a house constructed or go for an under-construction property, the construction has to be completed within three years. 

The bonds have to be bought within six months of the sale of the house. Please note that there is no capital gains exemption in respect of repayment of a home loan taken to buy a residential property except to the extent available under Section 80C

However, if you are able to sell your existing house property within one year from the date of purchase of a new house, you will be able to claim the exemption in respect of long-term capital gains arising on the sale of the present house. In case you are not able to sell the present house within one year of the purchase of this house, no capital gains exemption will be available with respect to the house property proposed to be bought. 

However, you can claim an exemption under Section 54EC by investing the indexed long-term capital gains in capital gains bonds of specified financial institutions within six months from the date of sale of the existing flat. These bonds have a tenure of five years and interest received on these bonds is fully taxable. You can plan to repay the home loan after the completion of the five-year tenure of the bond.

103. Mr, X and his wife are going for a mutual divorce. This will be a one-time full and final settlement in addition to payment of monthly maintenance. Will these payments be taxable in her hand? Will he get any benefit from the alimony being paid to her?

There are no clear provisions as regards the taxation of alimony received. There are two types of alimony: a one-time payment and ii) a recurring payment. The court may order payment of one or both types of alimony while passing the divorce decree.

As far as recurring payments of alimony are concerned, since no specific exemption is provided in respect of such periodic payments, the same may get taxed in the hands of the recipient. However, the one-time alimony may be received as capital receipt and thus may not get taxed at all in her hands. This is fully supported by the decision of the Bombay High Court in the case of Princess Maheshwari Devi of Pratapgarh Poona vs CIT 147 ITR 258 where the court has come to the conclusion that a one-time payment of alimony is a transaction under which the right of the wife to get maintenance from her ex-husband gets partly or fully extinguished. The lump sum alimony received is to be treated as a capital receipt and hence, not taxable in the hands of the wife. Even if the lump sum is not treated as capital receipt, the same is certainly received for consideration under an agreement to live apart.

Since the relationship of husband and wife would no longer exist, the clubbing provisions in respect of assets transferred pursuant to the divorce decree will not be applicable. The court had further decided that the periodical payments as per the divorce decree can be treated as income.

Please note that even though the periodic payments made to your wife would be taxable in her hand, you still will not be able to claim any deduction for payments made under the divorce decree.