No clubbing rules for talent
QAssuming that a person had brought forward a short-term loss of `10 lakh and a long-term loss of `5 lakh from previous fiscal to the current fiscal and he had a capital gains of `3 lakh in short-term and `1 lakh in long-term nature in the current fiscal, I have the following questions:
■ Can he allowed to write-off the entire `4 lakh of capital gain (short-term and long-term) during the current fiscal by setting it off against the brought forward long-term loss of `5 lakh?
■ Or do I need to write-off short-term capital gain only against brought forward short-term losses, and long-term capital gains only against brought forward long-term losses?
A) Loss under the head “capital gains” cannot be set-off against income under any other head of income in the same assessment year. Loss relating to short-term capital asset is to be set-off against gains from long-term capital asset and/or gains from any other short-term capital assets in the same assessment year. Loss relating to longterm capital asset is to be set-off only against gains from any other long-term capital assets (and not gains from any short-term capital asset) in the same assessment year.
Capital loss (short-term or long-term) which cannot be set off in the same assessment year can be carried forward for set-off. Unabsorbed loss relating to short-term capital asset is to be carried forward and set off against income from capital gains, both long-term and short-term.
Unabsorbed loss relating to long-term capital asset is to be carried forward and set-off only against long-term capital gains and not against short-term capital gains. Unabsorbed loss (shortterm or long-term) can be carried forward for eight succeeding assessment years.
Long-term capital gains arising on the transfer of units of an equity oriented mutual fund are exempt under Section 10(38) of the Income-Tax Act, 1961. Long term capital gains on the sale of other than equity oriented mutual fund schemes are taxable at the flat rate of 10 per cent without indexation or at the rate of 20 per cent with indexation benefit.
Short-term capital gain on the sale of equity oriented mutual fund units (and where the securities transaction tax is paid) is taxable at a flat rate of 15 per cent and on the sale of other than equity oriented mutual fund units (where no STT is paid) is taxable at 30 per cent.
QI have invested `1.5 lakh in my wife’s account in a fixed deposit and she has earned around `10,500 from it. I understand that I will be paying taxes on `10,500 because of clubbing provisions. However, she has further invested `25,000 in equities and has earned `600 by trading in equities. Should the `600 be included in my tax record or my wife’s? P. SHIVA Via email
A) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly — to the spouse of such individual by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern in which such individual has a substantial interest.
However, nothing in this clause shall apply in relation to any income arising to the spouse where the spouse possesses technical or professional qualifications and the income is solely attributable to the application of his or her technical or professional knowledge and experience.
So the interest from fixed deposit will be taxable in your hands as per the clubbing provisions but the amount of `600 that was earned by your wife by trading equities will be her income and not yours.