Personal Finance

Tax Talk

SANJIV CHAUDHARY | Updated on February 02, 2013 Published on February 02, 2013

You and your wife can claim HRA exemption after considering the individual share of rent paid by each of you.

My yearly income is less than Rs 1 lakh. Recently I bought some shares in an IPO and sold them immediately, making a profit of Rs 6,000 in a week. Apart from this, I have no other short term gain during the year. Do I still have to pay income tax on this? I have never had to pay any income tax so far.

— Arunima

We understand that you did not hold the shares for more than 12 months, hence the gain on sale of such shares shall be Short Term Capital Gains (STCG). According to the Income-tax Act, STCG from the sale of shares on which Security Transaction Tax (STT) has been paid is taxable at the rate of 15.45 per cent (including education cess). However, in the case of a resident individual or a resident Hindu undivided family, where the total income excluding such short-term capital gains is below the exemption limit of Rs 2,00,000 (for A.Y. 2012-13) , then such STCG can be adjusted against the unutilised exemption limit of Rs 2,00,000.

The tax on the balance of such STCG shall be computed at the rate of 15.45 per cent. Since your total taxable income including the STCG is Rs 1,06,000 which is below the basic exemption limit of Rs 2,00,000 applicable to an individual for the A.Y. 2012-13, you will not be liable to pay any tax on the STCG provided you are a resident of India according to the Indian tax law.

If my wife and I share the amount of rent paid out every month equally, can both of us claim HRA deduction from our respective employers?

— Kumar

According to the Income-tax law, house rent allowance (HRA) paid to an assessee by his employer to meet expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee, shall be exempt up to the prescribed limits. The following conditions have been attached for claiming this exemption:

(a) Residential accommodation occupied by the assessee is not owned by him; and

(b) assessee has actually incurred expenditure on payment of rent.

Hence, both of you can claim HRA exemption after considering the individual share of rent paid by each of you (up to the prescribed limits). There should be clear documentation with the landlord as to who is paying the rent and quantum thereof.

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(The author is a practising chartered accountant)

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Published on February 02, 2013
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