Personal Finance

Your Taxes

Sanjiv Chaudhary | Updated on October 06, 2019

I have rented out my building to a bank. During FY2018-19, the bank deducted ₹14,174 from my rental income as tax. But the TDS deposited was only ₹8,504 as per Form 26AS. The bank couldn’t sort out the mismatch till August 31, 2019. How can I represent the matter to the Department of Direct Taxes?

C Visalakshi

We understand that you have filed your return of income for FY 2018-19 by the extended statutory due date of August 31, 2019, claiming credit of taxes actually deducted by the bank on rental payments made to you, i.e., ₹14,714. However, the credit of taxes reflecting in your Form 26AS ( tax reported by the bankers in their quarterly tax statements /Income Tax Department’s records) is ₹8,504.

Please note that every tax return filed is processed for its arithmetical accuracy, etc, under Section 143(1) of the Income Tax Act. As a next step, the return of income filed shall be processed by the department in due time (if not processed yet), and upon processing, you will receive an intimation from the department’s end.

Since the department’ s records reflect an amount of ₹ 8,504 as tax deducted at source, the said intimation shall reflect a demand generated on account of the mismatch of the TDS credit. In such a case, the intimation shall also be considered as a notice of demand and you will be instructed to pay the balance liability (along with consequential interest, if any, under Section 234B and C of the I-T Act) or file your online response to the demand, within 30 days of receipt of such notice.

You can then submit your response to the demand raised by the department along with the facts of the case and documentary evidences, such as any correspondences with the bank, your bank statements reflecting the receipt of rent after deduction of appropriate taxes. Also, as the bank would be required to revise its quarterly tax returns to rectify discrepancy, you may mention in your response that the bank is in the process of revising its quarterly withholding tax returns, post which the appropriate tax credit of ₹ 14,714 shall reflect, and the demand shall stand deleted.

Please note that as a deductor of taxes, it is the bank’s responsibility to deduct and deposit appropriate taxes and also issue quarterly withholding tax certificate in Form 16A.

I sold a residential plot which gave me long-term capital gains as I had held the plot for more than five years. Please advise me on the following for saving tax on sale after considering indexation. 1) Can I adjust my short- or long-term losses in equities/debt funds with the sale value of the plot and pay tax @ 20 per cent on the balance amount derived? 2) Can I invest the balance amount in five-year NHAI/REC capital gain bonds after adjusting the loss amount as above, or do I have to invest the total amount after indexation in these bonds?

Lalit Kumar

1) Loss arising under the head ‘Capital Gains’ can be carried forward for eight years immediately succeeding the year in which the loss is incurred. Such loss can be carried forward only if the return of income of the year in which the loss is incurred is furnished on or before the due date of furnishing the return, under Section 139(1) of the I-T Act.

Loss under the head Capital Gains can be adjusted only against income chargeable to tax under the head capital gains. However, it is important to note that long-term capital loss can be adjusted only against long-term capital gains. Short-term capital loss can be adjusted against both long- and short-term capital gains.

In light of the above, capital losses brought forward by you (both long- and short-term) can be adjusted against long-term capital gains arising on transfer of the residential plot.

2) Section 54EC of the I-T Act provides for exemption of long-term capital gains arising on transfer of land or building or both, upon fulfilment of the specified conditions.

The exemption shall be allowed to the extent of the lower of the following: a)Amount of capital gains arising on transfer of the original asset b) Cost of specified asset, ie, the prescribed bonds.

In light of the above, you may invest the net amount of capital gains, ie, after setting of the losses, in order to claim the exemption of the capital gains. However, such investment should not exceed ₹50 lakh during the subject financial year and subsequent financial year.

The writer is a practising chartered accountant.

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Published on October 06, 2019

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