Readers’ Corner
I want to sell two houses and buy a bigger one. As I am putting money in a new house property, I am eligible to get the capital gains benefit. I wish to know if I can get the benefit for just one property or both?
According to section 54 of the Income-Tax Act, if you sell a residential house, the income from which is chargeable under the head 'income from house property', you can claim a deduction while calculating taxable capital gains. This can be done by utilising the earned capital gains in purchasing/constructing another residential house within prescribed timelines. It is clear that deduction is allowed only if the investment is done in one new residential house property. However, there is no explicit restriction on allowing the deduction in a case where more than one house is sold and therefore, you can claim the deduction in respect of capital gains invested from the sale of both the houses.
I am starting a business of my own. To raise the initial money, I plan to sell some gold and jewellery that was passed to my family from my parents. Will there be any tax on selling gold and jewellery received as a gift from my parents? Some of it was passed through generations and I don’t have bills for those. A capital asset for the purpose of computing capital gains under section 45 of the Income-Tax Act includes jewellery, ornaments made of gold, etc. Where such gold/jewellery is given to you as a gift by your parents, there would be no tax on such gift. However, where you sell the same, by virtue of provisions contained in the Act, you will be liable to tax in relation to the capital gains earned on such sale. Considering the holding period of the items is more than three years (including the period of holding by your parents), the resultant gain shall be long-term and taxed at 20 per cent plus applicable surcharge and cess. Capital gains would be computed by deducting the indexed cost of acquisition from the sale consideration received. To calculate capital gains, the cost of acquisition will be taken as the cost in the hands of the previous owner (your family). However, in respect of an asset purchased before April 1, 2001, you have an option to substitute the cost of acquisition with the higher of the actual cost of acquisition to the previous owner or fair market value of the asset as on April 1, 2001. Since you do not know the actual cost price of these capital assets in the hands of your parents, you may consider getting the valuation done as on April 1, 2001, for determining its cost for the capital gain purpose.
What happens if a salaried person doesn’t file income tax return but employer deducts the tax and deposits with the income-tax department? I have not filed income tax return for the past four years.
An individual is liable to file the tax return where his total income exceeds the basic exemption limit. (~250,000 for the tax year 2017-18 for individuals less than 60 years of age) irrespective of the fact that the taxes have been duly deducted and deposited by the payer of income. Non-filing of return of income may lead to levy of penalty where there is any tax payable and in extreme cases, tax authorities may even invoke prosecution provisions under section 276CC of the IncomeTax Act subject to the satisfaction of conditions contained therein. From this year, there is a mandatory levy of a fee, if you do not file your return of income within the due date. You will end up paying fees under section 234F of the Act of ~5,000 if you file the return after the due date but before December 31, 2018, and ~10,000 if you file it afterwards. You will not be able to file a belated return for any of the previous years now considering they are time-barred.
How are dividends of debt mutual funds taxed?
Dividends from debt mutual funds are exempt in the hands of recipients under section 10(35) of the Income-Tax Act. The same is required to be reported under the section 'exempt income' in the return form.
The writer is partner and leader, personal tax, PwC India. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in