Your Taxes

I am a senior citizen. My total income is ₹2.9 lakh. I have also redeemed units of a debt fund, wherein I earned long-term capital gain of ₹1 lakh and a long-term capital loss of ₹83,000 after adjusting for indexation (No STT deducted). The redemption happened in December 2014. Can I adjust the long-term loss with long-term gain?

V Arunachalam

Assuming that the units of debt-oriented mutual funds were held for more than 36 months and, thus, would qualify as long-term capital asset (LTCA). , any income arising on the transfer of such LTCA shall be taxed as long-term capital gain (LTCG).

From July 11, 2014 LTCG for sale made on or after July 11, 2014 is taxed at the rate of 20 per cent. (excluding surcharge and cess).

Where the result of the computation made in respect of sale of any LTCA is a loss, it can beset off against the capital gain income, if any, in respect of sale of any other LTCA. In your case, you can set off the long-term capital loss from the LTCG earned on sale of debt-oriented mutual funds.

Since your other income, as reduced by long-term capital gains, is below the maximum amount which is not chargeable to tax (₹300,000 in the case of assessee over 59 years of age), the long-term capital gains shall be reduced by the amount by which the total income so reduced falls short of the maximum amount which is not chargeable to tax. The tax on the balance of such long-term capital gains shall be paid at the rate of 20 per cent . Thus, you will be required to pay 20 per cent tax on ₹7,000, that is, the difference between net LTCG and the other income falling short of the maximum amount not chargeable to tax [₹17,000 – (₹300,000 – ₹290,000)].

I signed up for an insurance policy under a single premium plan (sum assured ₹1 lakh and premium ₹99005) in 2010 and it matured on April 1, 2015. LIC paid the maturity amount of ₹1, 34,628 after deducting tax at 2 per cent. Do I need to add the full maturity amount to my total income in the financial year 2015-16 to assess my tax liability?

James Thakken

Any sum received under a life insurance policy, including that allocated by way of bonus on such policy is exempt in the hands of the assessee, subject to conditions.

Exemption is not applicable on any sum received under an insurance policy issued on or after April 1, 2003 but on or before March 31, 2012 if the premium payable for any of the years during the term of the policy exceeds 20 per cent of the actual capital sum assured.

In your case, since the premium paid in year 1 is more than 20 per cent of the sum insured and the policy was issued in April 2010, any excess received by you over the premium paid shall be taxable in your hands on the slab rate applicable. Thus, ₹35,633 (₹ 1,34,638-₹99,005) shall be added to your total income of FY 2015-16 and taxed at the applicable slab rates. You can claim credit for the TDS.

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

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