I purchased a re-sale flat in October 2009 for Rs 19 lakh (with registration and other charges, the total cost was Rs 2.5 lakh). I took a bank loan of Rs 15 lakh. I sold the flat in August 2016 for Rs 49.5 lakh and spent Rs 50,000 for brokerage. I paid Rs 8 lakh to clear the outstanding loan. What is the tax that I have to pay and what options do I have to save the tax?
Murthy
Your cost of acquisition is assumed at Rs 21.5 lakh. You have purchased the flat in FY10. You have sold that flat in FY17. The net sale consideration is Rs 49 lakh (49.5 lakh-brokerage 50,000).The indexed cost of acquisition in your case will be Rs 38,27,136.The long-term capital gain chargeable to tax will be Rs 10,72,864 (49,00,000-38,27,136). You will not get deduction of Rs 8 lakh paid to clear the outstanding loan. You will be liable to pay capital gain tax at 20% on Rs 10,72,864.
You can save payment of capital gain tax if you invest Rs 10,72,864 into specified bonds prescribed under section 54EC of I-T Act, being the bonds issued by National Highway Authority of India or by Rural Electrification Corporation, within a period of 6 months from August 2016. You can also purchase another residential unit within a period of 2 years from August 2016 and invest the capital gain earned by you amounting to Rs 10,72,864.
I file personal tax returns under the head `Income from other sources'. I invested in fixed deposit (FD) of a public limited company which subsequently shut down. The principal and some interest amount remains unpaid. Can I claim this amount as a deduction? Is there a way to offset this loss?
Manish Ashar
You offer the interest income under section 56 of I-T Act under the head `Income from other sources'. The amount invested in fixed deposit of public company which is shut down cannot be claimed as deduction in computing total income taxable under the head `Income from other sources'. There is no provision in the I-T Act to claim deduction in respect of the non-recovery of the loan and interest against the income from other sources. Any person carrying on business of banking or money lending can claim deduction in respect of the bad loans while computing the income under the head `Income from Business or Profession'.
I understand interest income above Rs 10,000 is taxable. Can I claim expenses such as cheque book charges, account handling charges, ATM charges, etc.?
Gopal Dangar
Under Section 80TTA of I-T Act, an individual can claim deduction of up to Rs 10,000 being the interest received on deposit in a saving account. In your case the income is chargeable to tax under Section 56 of I-T Act. Under Section 57(iii) of I-T Act, any expenditure which is laid out or expended wholly and exclusively for the purpose of earning income which is chargeable to tax under section 56 can be claimed as deduction.
The expenditure in the nature of cheque book charges, account handling charges, ATM charges, etc. cannot be construed as expenditure laid out wholly and exclusively for the purpose of earning interest income. You will not be entitled to claim deduction of any such expenditure while computing your total income.
(Please send your queries on Tax to et.tax@timesgroup.com)
Murthy
Your cost of acquisition is assumed at Rs 21.5 lakh. You have purchased the flat in FY10. You have sold that flat in FY17. The net sale consideration is Rs 49 lakh (49.5 lakh-brokerage 50,000).The indexed cost of acquisition in your case will be Rs 38,27,136.The long-term capital gain chargeable to tax will be Rs 10,72,864 (49,00,000-38,27,136). You will not get deduction of Rs 8 lakh paid to clear the outstanding loan. You will be liable to pay capital gain tax at 20% on Rs 10,72,864.
You can save payment of capital gain tax if you invest Rs 10,72,864 into specified bonds prescribed under section 54EC of I-T Act, being the bonds issued by National Highway Authority of India or by Rural Electrification Corporation, within a period of 6 months from August 2016. You can also purchase another residential unit within a period of 2 years from August 2016 and invest the capital gain earned by you amounting to Rs 10,72,864.
I file personal tax returns under the head `Income from other sources'. I invested in fixed deposit (FD) of a public limited company which subsequently shut down. The principal and some interest amount remains unpaid. Can I claim this amount as a deduction? Is there a way to offset this loss?
Manish Ashar
You offer the interest income under section 56 of I-T Act under the head `Income from other sources'. The amount invested in fixed deposit of public company which is shut down cannot be claimed as deduction in computing total income taxable under the head `Income from other sources'. There is no provision in the I-T Act to claim deduction in respect of the non-recovery of the loan and interest against the income from other sources. Any person carrying on business of banking or money lending can claim deduction in respect of the bad loans while computing the income under the head `Income from Business or Profession'.
I understand interest income above Rs 10,000 is taxable. Can I claim expenses such as cheque book charges, account handling charges, ATM charges, etc.?
Gopal Dangar
Under Section 80TTA of I-T Act, an individual can claim deduction of up to Rs 10,000 being the interest received on deposit in a saving account. In your case the income is chargeable to tax under Section 56 of I-T Act. Under Section 57(iii) of I-T Act, any expenditure which is laid out or expended wholly and exclusively for the purpose of earning income which is chargeable to tax under section 56 can be claimed as deduction.
The expenditure in the nature of cheque book charges, account handling charges, ATM charges, etc. cannot be construed as expenditure laid out wholly and exclusively for the purpose of earning interest income. You will not be entitled to claim deduction of any such expenditure while computing your total income.
(Please send your queries on Tax to et.tax@timesgroup.com)
(Your legal guide on estate planning, inheritance, will and more.)
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(Your legal guide on estate planning, inheritance, will and more.)
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