Tax Query: Income tax exemption limit for senior citizens

I am a senior citizen. In FY 2021-22 I have earned ₹5,000 short term capital gain on sale of shares. My total income including short term capital gain is below taxable income. Whether I will be require to pay 15 per cent tax on ₹5,000?

Vijaykumar Shingade

As per the provisions of Income-tax Act, 1961, a resident individual is eligible to consider the benefit of progressive slab rates and can adjust the Short-term Capital Gains (STCG) against the basic exemption limit available (currently ₹3 lakh for senior citizen). I understand that your total income including STCG is below ₹3 lakh. Assuming that you qualify as Resident of India, you will not be required to pay any tax on such STCG.

Short term capital gains out of sale of shares or redemption of mutual funds are taxable at 15 per cent as per present rules. I understand that these gains, if it is within the taxable income limit of ₹2.5 lakh for non-senior citizens and ₹3 lakh for senior citizens (STCG, salary, interest and other income, all together), is exempted from tax. In such cases, can we report STCG under other Income and use only ITR 1 for the above stated income i.e. when no other professional income is involved or should we use only ITR-2 for reporting STCG even though no tax is payable?

R Narasimhan

Form ITR-1 is applicable for individuals qualifying as Resident and Ordinarily Resident having total income up to ₹50 lakh under the following heads:

a) Income from Salary/ Pension; or

b) Income from One House Property; or

c) Interest income and/ or family pension taxable under Other Sources

d) Agricultural income up to ₹5,000

Since you have earned capital gains and there is no income under the head profits and gains of business and profession, you would be required to file income tax return in Form ITR-2. Reporting of the Short-Term Capital Gains (STCG) under the head other sources would not be the correct reporting.

Please be advised that every individual has to file the return of income if his total income (including income of any other person in respect of which he is assessable) exceeds the maximum amount which is not chargeable to tax i.e. exceeds the exemption limit, currently ₹3 lakh for resident senior citizens. Further, an individual having income below the exemption limit, may still be required to file the return of income if such taxpayer:

g) holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India

h) has signing authority in any account located outside India

i) is a beneficiary of any asset (including any financial interest in any entity) located outside India

j) has deposited an amount (or aggregate of amount) exceeding ₹1 crore in one or more current accounts maintained with a banking company or a co-operative bank. .

k) has incurred more than ₹2 lakh on travel to a foreign country, either for himself or for any other person. .

l) has incurred an expenditure exceeding ₹1 lakh on electricity consumption.

If the above requirement is not fulfilled, you are not mandatorily required to file tax return for such Financial year.

The writer is a practising chartered accountant

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