Q. I am a retired pensioner. My PPF account is maturing on March 20, 2022. I had already extended the term by 5 years. Now, I am planning to close the account on maturity. My question is whether the investment in this account during the FY 2021-22 will qualify for rebate under Sec. 80 C of I-T Act.
D.R. Prasad
A. Contribution towards PPF in a particular assessment year can be availed as deduction under Section 80C of the Income Tax Act, 1961 irrespective of the maturity of the 5- year additional term. Further, it is to be noted that PPF investments can be extended for any number for a block of 5 years with further deposits and the account retained indefinitely without further deposit after maturity with the prevailing rate of interest.
Q. In a year of trading transactions, please advise on below data viz. short-term gains ₹3.5 lakh, long-term loss ₹5.5 lakh,
intraday gain ₹0.03 lakh and dividends of ₹0.35 lakh. The final profit is negative. Do I have to pay tax on the short-term front?
Anil Kumar
A. The nature of incomes earned by you is to treated in the following manner and cannot be set off against other heads. Short Term Capital Gains (STCG) from listed equity securities for which STT has been paid for will be taxed at a special rate of 15%.
Long Term Capital Loss (LTCL) cannot be set-off with the STCG; however, the same can be carried forward for eight assessment years until it has been set off appropriately.
Intraday trading of equity securities will be treated as speculative business. Turnover is to be computed by adding the gains and the absolute figures of the loss. Related expenses such as brokerage, Internet expenses, depreciation for the assets used and exchange charges can be claimed as expenses. The resultant figure of the gains/loss reduced by the expenses will be treated as either Speculative Profit or Loss.
Dividends from AY 21-22 will be taxable in the hands of the receiver and the same will be added to your total income under the head ‘Income from Other Sources.’
Q. I am 31. I booked an under-construction residential flat in 2019 for which I had taken a home loan. I have been paying EMIs since then and submitting the income tax certificate to claim rebate. I have been denied rebate on interest and the principal repaid is also not included in savings under section 80C. Is this correct?
Prashant Kumar
A. The amount of principal repaid in the assessment year cannot be claimed as deduction under Section 80C of the Income Tax Act, 1961, as only amounts repaid towards the capital borrowed for the purpose of purchase or construction of a residential property whose income is chargeable under ‘Income from House Property’ can be claimed as deduction. In your case, the building is still under construction and the apartment has not been handed over, whereby income accruing from the property cannot be charged under ‘Income from House Property.’
The interest paid on housing loan until the date of completion cannot be claimed as deduction in the year of payment of such interest. The interest paid until such completion is to be divided into 5 equal parts and each part can be claimed as deduction in the form of pre-construction interest from the year of completion of construction. It is to be noted that the maximum deduction under this provision cannot exceed ₹2 lakh a year (including the interest paid for that assessment year).
Q. My sister and I inherited a residential flat after my mother's demise. Both of us are pensioners and receive FD interest. The flat is self-occupied and there is no other property. We regularly file our I-T returns for our pension and interest income. We plan to sell this property worth ₹45 lakh.
Since we both have equal share, how will it be reflected in Form 26AS? This property was bought in 1996 for ₹4 lakh and the fair market value of the flat in 2001 was ₹9 lakh.
After applying indexation cost, the value works out to about ₹27 lakh. After selling this property, if my sister and I deposit ₹22.5 lakh each in our respective savings bank accounts, what will be the capital gains tax?
S. Sujatha
A. As the value of the sale consideration of the residential flat is lower than ₹50 lakh, the buyer is not required to deduct TDS of 1% on the sale consideration; thereby, such transaction will not appear in either of your Form 26AS under the TDS section.
However, the transaction shall appear under Specified Financial Transactions in the Form 26AS as a disclosure of the transaction that has taken place in the respective assessment year. You may invest an amount equal to or higher than the difference between sale consideration and the indexed cost of acquisition in specified bonds under Section 54EC within 6 months from the date of transfer to avail the full exemption of tax with respect to the long term capital gains, the maximum amount that can invested under this exemption is ₹50 lakh each and you are well within the limit.
You may also invest an amount equal to or higher than the difference between sale consideration and the indexed cost of acquisition for purchase or construction of a residential property in India within two years or three years, respectively, from the date of transfer.
(The adviser is partner, GSS Associates, Chartered Accountants, Chennai)
