Personal Finance

Your Taxes

Sanjiv Chaudhary | Updated on March 10, 2019 Published on March 10, 2019

Currently, long-term capital gains of over ₹1 lakh on sale of listed equities/redemption of mutual funds are taxable at 10 per cent.

Kindly let me know whether these gains are still taxable if the income including these gains is below the taxable limit. Also, will switching from one scheme to another within the same mutual fund be treated as capital gains?

Are dividends of over ₹10 lakh received on shares of listed companies independently taxable at 10 per cent or only if the taxable income including the dividend exceeds the overall exemption limit?

Madan Mohan

As per the newly inserted Section 112A by The Finance Act 2018 (applicable for FY 2018-19), Long-term capital gains (LTCG) arising from sale of listed equity shares or equity-oriented funds (STT (Securities Transaction Tax) paid at specified times) is calculated at 10 per cent without giving the benefit for cost inflation index for amounts exceeding ₹1 lakh.

In the case of a resident individual, such LTCG is not taxable to the extent the total income (excluding such LTCG) falls short of the maximum amount that is not chargeable to income tax (₹2.5 lakh for FY 2018-19).

However, no deduction under Chapter VI-A is allowed from such LTCG.

Further, switching from one scheme to another of a mutual fund is to be treated as transfer and hence liable for capital gains tax.

Also, as per Section 115BBDA of the Income Tax Act, if a resident individual receives dividend income that is declared/distributed/paid by a domestic company/ companies, exceeding ₹10 lakh during a financial year, such excess dividend income shall be taxable at 10 per cent without giving the benefit of tax slab rates.

I reside in a property solely owned by my mother. I pay rent to her and have been claiming HRA deduction for the same for the past seven years.

We are planning to sell the house and buy a new one. The new house will be financed by the proceeds of the old house’s sale and my mother's other savings, which include the rent I have been paying her.

Now, considering that she is aged and because I don't want to go through the legal hassles of getting the name transferred to my name in case of her death, we wish to get my name included as a joint owner in the new property.

Since I will not be paying a single rupee towards the purchase price of the property, can I still continue paying rent to my mother after we move into the new house where I am a joint owner of the property?

Will I be eligible to claim HRA exemption on such rent payment?

Tapas

Section 10(13A) of the Income Tax Act provides for exemption in respect of the house rent allowance specifically granted to an employee by his/her employer to meet the expenditure actually incurred on payment of rent in respect of the residential accommodation occupied by the employee.

However, it specifically excludes such cases where rent is paid for a residential accommodation owned by such an employee.

Thus, if you become the joint owner of the new property, technically speaking, you may not be in a position to claim exemption of HRA for the same property of which you are a joint owner.

Having said that, as the funds invested in the property belong solely to your mother, from the authorities’ stand point, she might be considered the actual owner of the property for the purpose of paying tax on rental incomes derived (if any) from such property (you being a joint owner only on papers for administrative reasons).

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

Published on March 10, 2019

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.