Tax Talk

SANJIV CHAUDHARY | Updated on March 23, 2013 Published on March 23, 2013

Interest income paid to you on the refund of your tax is chargeable to tax.

Sanjiv Chaudhary

I recently received income tax refund for the assessment year 2008-09 along with interest. Could you please let me know whether I have to pay income tax for the interest received?

— Pradeep Bhat

According to the income-tax provisions, income not falling under the head of salary, house property, business and capital gain, is chargeable to tax under the head ‘Income from other sources’. It is the residuary head of income. Interest income paid to you on the refund of your tax is chargeable to tax under this residuary head. You are liable to pay income-tax on such interest income at the applicable slab rates.

I was allotted 314 shares of Rs 10 paid up value by a newly raised company on January 4, 2003. Subsequently, on February 4, 2004, the company issued me 15,700 shares of paid up value Rs 10 as bonus shares making my total holding to 16,014 shares. The shares are now dematerialised and we expect they will be listed in the stock exchanges shortly. On listing, I propose to sell them paying the appropriate Securities Transaction Tax through the brokerage company. My query is whether I am due to pay any income tax on the gains on such sale?

— Col Devidas

Under the prevailing tax laws, a long term capital asset includes any share which is held by the assessee for more than 12 months preceding the date of its transfer. Capital gain from transfer of a long term capital asset (being an equity share or an equity oriented mutual fund) is exempt from tax if such sale is subject to Securities Transaction Tax (STT). Based on the facts provided above, we understand that you will be selling long term capital asset being equity shares and will be subject to STT on such sale. Accordingly, the long term gain arising on sale of such listed equity shares shall be exempt from tax.

Mail your queries to >taxtalk@thehindu.co.in

(The author is a practising chartered accountant)

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Published on March 23, 2013
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