The Hindu Business Line : Teacher with a tax problem

There will be no tax on your income since it falls within the maximum amount which is not chargeable to tax. You also would not be required to file a return of income.

I had purchased a land about 18 months back. I understand that if I sell the same now, the gain will be treated as short term-capital gain.

Can I avoid the payment of tax on sale of such land by reinvesting in another land? —Babu

No exemption will be available in respect of the capital gains from sale of the land which is short term.

The reinvestment in another land will not entitle you to an exemption.

Can the following be claimed as a deduction in computing short-term capital gains from sale of shares: Service tax paid on brokerage, stamp duty on contract notes, securities transaction tax. — Bhagiarat

The service tax paid on the brokerage charged at the time of sale will be part of the expenditure incurred wholly and exclusively in connection with the transfer and can therefore be claimed as a deduction.

The service tax that is paid on brokerage charged at the time of purchase of shares will, however, be a part of the cost of acquisition of shares and therefore will effectively qualify for deduction.

This will apply in respect of stamp duty on contract notes as well. Securities transaction tax will, however, not qualify for deduction in computing the short-term capital gains.

I have been a non-resident in accordance with the Income Tax Act for a period of 20 years beginning from 1982 to 2002.

I understand that I will therefore be a resident but not ordinarily resident for the next seven years commencing from the year ended March 2002.

Is this correct? Also whether the interest from deposits in returning foreign currency will be eligible for exemption in my hands? — K. Madana Gopal

You will not be a resident but not ordinarily resident for seven years after March 2002 but will only be a resident but not ordinarily resident for one year thereafter.

Your residential status will now therefore be that of resident and ordinarily resident. You therefore cannot claim any exemption in respect of the interest on foreign currency deposits.

I purchased 300 shares of Infosys Ltd on December 31, 2005. Securities transaction tax was paid at the time of such purchase.

Rupak Das

Presumably all the 600 shares of Infosys Ltd have been sold by you through a recognised stock exchange where securities transaction tax has been paid by you at the time of sale.

If this were so, the capital gains on the sale of the original shares purchased will be exempt since these shares have been held by you for a period exceeding 12 months before the sale which will make the gain long term and thus exempt under Section 10(38). The capital gains on the sale of the 300 bonus shares will be a short-term capital gain since it is held for a period not exceeding 12 months before its sale.

Such capital gains will be chargeable to tax at 10 per cent (as increased by the appropriate surcharge and additional surcharge) in accordance with Section 111 A. The cost of acquisition of the bonus shares will be taken as Nil in accordance with Section 55.

Can I claim the deduction under Section 80-G in respect of donations from short-term capital gains arising from the sale of shares? — Nobal

If the short term capital gains is chargeable at 10 per cent (as increased by the surcharge and additional surcharge) under Section 111A, no deduction can be claimed under Section 80-G against such short-term capital gains.

Section 111A provides for charging tax at the rate of 10 per cent on short-term capital gains from transfer of shares which are sold through recognised stock exchange and where securities transaction tax is paid at the time of sale. You may note that there is a specific prohibition under Section 111A on claiming deductions under chapter VI-A which includes Section 80G, against such capital gains.

If, however, the short-term capital gains are not chargeable at the rates prescribed under Section 111A due to not satisfying the conditions stated therein the deduction under chapter VI-A can be claimed against the same.

An assessee furnished a return of income claiming a refund.

He, however, died before the refund could be issued to him. Will it be possible for his spouse or other legal heirs to claim and get the benefit of refund?

If so what are the requirements to be complied with to claim the same? — Subramanian

Section 238(2) specifically provides that where through death, incapacity, insolvency, liquidation or other cause a person is unable to claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver as the case may be shall be entitled to claim or receive such refund for the benefit of such person or his estate.

It is therefore possible for the legal heirs of the deceased to receive the refund which is due to the deceased.

The legal heirs must take steps to have themselves brought on record before the Assessing Officer by intimating the death of the assessee to him and also by producing proof of such death and legal heirship before him.

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