Your Taxes

I received arrears of salary relating to 2006-13 during the current financial year. When this amount is added to the current year’s salary income, I am liable to pay tax.

However, if this amount is apportioned to the respective previous years, there is no incidence of tax in any year.

In such a case, is it necessary for me to pay the tax before March 31, 2016? 

Without paying the tax now, can I show it as tax relief against the item under Section 89, while filing the ITR for FY 2015-16? When and how can Form 10E under Section 89 be used for information/intimation to the IT Department?

Rama Rao Vangala

According to the provisions of Income Tax Act, where an assessee receives salary for more than 12 months in the form of arrears or in advance in any financial year, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall grant prescribed relief on an application made to him.

In your case, you may claim relief for the arrears of salary received by you and, accordingly, you will not be liable to pay tax in the current financial year since your total income after apportioning the salary to respective years is less than the maximum amount not chargeable to tax.

It should be noted that such relief should be appropriately reported in your tax return for financial year 2015-16 and Form 10E be furnished to the employer who is responsible for deducting tax at source.

Practically, if Form 10E is not filed online, the Central Processing Centre will reject the relief while processing the tax return. Hence, online filing of Form 10E is recommended in case the said relief is claimed by an assessee.

I had recently sold shares gifted to me by my husband. My holding period is less than 10 months.

Kindly advise me on whether the purchase price of the shares for calculation of short-term capital gains will be zero or whether it is the price of shares on the day  of transfer into my account from my husband’s account. 

Vijayalakshmi

According to the provisions of Income Tax Act, 1961, there are no tax implications in your hands on account of receiving a gift from your husband.

However, I understand that the shares are funded by your husband and hence when you sell the gifted shares, clubbing provisions will apply.

Accordingly, the income arising from the sale of the gifted shares will be taxable in your husband’s hands.

The tax implications in your husband’s hands would depend on such factors as period of holding of shares by your husband, whether securities transaction tax (STT) is paid on sale, and whether shares are listed on a recognised stock exchange, among others.

The date when your husband purchased the shares would be considered as the acquisition date of the shares and the cost he paid for those shares shall be the cost of acquisition for computing the capital gains on sale of these shares.

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

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