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Q. I am a retiree from Haryana Government aged 71 years. Besides pension and bank interest, I also have income from equity and MFs and dividend from them. I used to sell them after holding them for period more than 1 year and through exchange after paying STT and other charges and earning as LTCG which was tax- free. But from this financial year, LTCG and dividend are taxable. Please let me know how to calculate the tax where to deposit it.
- Kuldip Singh
A. Dividend income on equity shares held by an individual is not taxable if the amount does not exceed Rs 10,00,000 for any financial year. Dividend in excess of Rs 10,00,000 is currently taxable @10%. Income arising from the sale of equity shares and units of equity-oriented mutual fund would be taxable in excess of Rs 1,00,000 from the assessment year 2019-20 in accordance with the amended provisions of the Income-tax Act 1961 (The Act).
Income under the head “capital gain” is computed after taking into account the indexed cost of the capital asset and expenditure incurred wholly and exclusively in connection with the sale and deducting the same from the sale consideration. The balance amount represents capital gain. You will have to deposit the amount of tax payable, if any, on the income arising from the sale of units of equity-oriented mutual fund with the government in the manner in which other taxes are deposited.
Q. I purchased a flat in FY 1984-85 for Rs 37,000. Later on, I spent Rs 160,000 on renovation, monthly instalments and lease money. In FY 2018-19, the abovesaid flat was sold for Rs 36 lakh in April. In the FY 2018-19, I have purchased a flat in May for Rs 65 lakh in the name of my son (first name) and myself (second name). This amount is paid through RTGS directly to the seller. Details are as under:
Rs 35 lakh: Paid by me (sold my old flat)
Rs 20 lakh paid by me from my savings
Rs 10 lakh paid by my son from his savings
My queries are as under:
1. What is my tax liability and capital gain as I have received Rs 36 lakh from the sale of my old flat and paid Rs 35 lakh for the purchase of the new one.
2. How can I show it in my income tax return for the Assessment year 2019-2020. Which ITR form I should file as my income is from pension and interest.
3. What about my son’s tax liability in this case as he is also co-partner in the purchase of the flat.
- Aman Singla
A. Your queries are replied hereunder:
(a) It is not possible to compute the amount of capital gain and tax liability thereon as the figure of fair market value of the house property as on 1.4.2001 has not been indicated in the query. The amount of capital gain can be computed after applying cost inflation index to the fair market value as on 1.4.2001. The cost inflation index notified for financial year 2018-19 is 280. The amount invested by you for the purchase of the residential house property being within a period of two years after the sale of the house, the amount of capital gain should not be taxable as you have utilised the entire sale consideration towards the purchase of house property of which you are a joint owner.
(b) The amount of capital gain and its utilisation shall be reflected in ITR-2.
(c) Your son will have to reflect income, if any, being earned from the house property to the extent of his share in the said property. However, in case the property is self-occupied, he will have to reflect ‘nil’ income under head ‘Income from house property’ in the relevant column in the tax return form applicable to him.
Q. My son is living in the UK and is a British citizen. He has purchased/invested in mutual funds in India out of his NRE accounts with tax status mentioned on folios as NRI repatriable. Kindly clarify whether he will have to pay long term capital gain on these mutual funds held by him, as he has purchased these mutual funds out of his NRE accounts in India or it should be tax-free like bank interests on NRE deposits/fixed deposits.
- PL Saini
A. Income arising on the sale of unit of equity- oriented mutual fund is not chargeable to tax provided the transaction has been subjected to security transaction tax and it has been effected through a recognised stock exchange. This exemption is available to the extent of Rs 1,00,000 only and the balance amount of such income is taxable w.e.f. assessment year 2019-20 (financial year ending March 31, 2019). The income arising under the head “capital gain” from the sale of such unit cannot be classified under the category of a bank deposit.
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