Fixtures too get tax sop

QIn 2016-17, my wife had an income of `4,75,400. This comprises short-term capital gains of `2,59,700 from trading and investments in shares through stock exchange and interest from bank deposits of `2,15,700. After exhausting the basic exemption, she is left with a taxable income of `2,25,400. What is the rate of tax applicable on this income? Is she eligible for deduction u/s 80C against the short-term capital gain?

A) The entire income that is chargeable to tax after the basic exemption comprises of only short-term capital gains. If the short-term capital gains arise from dealing in shares through a recognized stock exchange, where securities transaction tax is charged at the time of sale, the gain will be charged to tax under Section 111A at the rate of 15 per cent.

No deduction under Section 80C can be claimed in respect of such income under the head capital gain arising from the sale of shares through a recognized stock exchange where securities transaction tax is charged at the time of sale as there is a specific restriction in this regard under Section 111A(2). You may alternatively choose to claim deduction under Section 80-C against income from bank deposits.

The amount after such deduction may be reduced from the basic exemption limit and such balance left after the basic exemption which is not adjusted against bank deposits may be set-off against the short-term capital gains and the balance, if any, will be charged to tax at the rate of 15 per cent in accordance with Section 111A.

QI have sold a plot of land and have put the total amount received in a capital gain account. Now I am investing the money into a new house under construction. Can the amount be used for fixtures like fans, AC, carpentry work, etc?

The cost of new house for the purpose of Section 54F doesn’t confine only to the cost of purchase of new house. But it also includes other necessary expenditure to make the house habitual. In order to allow deduction under Section 54/54F on the expenditure incurred by the assessee, it should relate to the new “house property” purchased by the assessee. However, in my opinion, expenditure incurred on air conditioner and other furniture and fixtures like sofa sets and interiors will not qualify for deduction.

The writer is a Hyderabad-based chartered accountant. Queries can be sent to info@rathiandmalani.com