PremiumIn the event of transfer of specified securities (including mutual funds), where the dates of purchase and sale of specific scrips cannot be correlated, based on the department circulars issued in this regard, the cost of acquisition and the holding period should be computed on First-In-First-Out (FIFO) method, for the purpose of computing capital gains
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How is STCG (short term capital gain) calculated for mutual funds? Is it on “First In- First Out" basis or “Last In- First Out" basis, i.e. if we switch out within the short-term period, are we selling the oldest or newest units?
—A. Garg
As per the provisions of the Income-Tax Act, where a unit of an equity oriented mutual fund or Unit Trust of India is held by an individual for 12 months or less, immediately preceding the date of transfer, any capital gain arising from transfer of unit is considered as short-term capital gain / loss (STCG/L). Further, where a unit of mutual fund is held by an individual for 36 months or less, immediately preceding the date of transfer, any capital gain arising from transfer of unit is considered as STCG/L. The STCG/L is calculated as the difference between net sale consideration (actual sale consideration less brokerage and incidental expenses) and the cost of acquisition (COA).
In the event of transfer of specified securities (including mutual funds), where the dates of purchase and sale of specific scrips cannot be correlated, based on the department circulars issued in this regard, the cost of acquisition and the holding period should be computed on First-In-First-Out (FIFO) method, for the purpose of computing capital gains.
Also, in the case of any securities held in dematerialized form, it has been specified under Section 45(2A) of the Act, that the cost of acquisition and the period of holding of such securities, shall be determined on FIFO basis. Accordingly, in the event of transfer, the cost of acquisition of such unit and the holding period should be computed on FIFO basis, for the purpose of computing capital gains i.e. we are selling the oldest units first.
I am a government employee and entitled to get rent. I took a flat on lease for monthly rent of ₹20,000 in 2020-21 FY. I started paying the rent as per the terms and conditions. However, the rent for my accommodation was fixed by the competent authority after about 13 months. Now my office transferred ₹234,000 to the landlord towards rent for 13 months after deducting 10% of the rent as TDS. My office informed that for all monthly payments, 10% would be deducted as TDS. I am paying rent directly to landlord’s bank account. Is the deduction lawful?
—Joseph Rajesh
It is presumed that you are not subject to tax audit in India. Further, we understand from your query that the lease agreement for the accommodation is between you and the landlord, for which you started paying the rent in FY 2020-21.
In case the rent is to be paid by you directly to the landlord, as per the provisions of Section 194-IB of the Income-Tax Act, 1961, you are required to deduct income tax at the rate of 5%, only if the rent exceeds ₹50,000 per month, as per the prescribed procedures. Hence, in such case, the tax deduction at source should not be applicable, as the rental amount is less than ₹50,000 per month. Generally, where a non-individual assessee, is responsible for paying rent to a resident, then as per the provisions of Section 194-I of I-T Act, 1961, the payor is required to deduct income tax at the rate of 10%, at the time of credit/ payment of such rent to the payee. No deduction under this section is, however, required where the amounts of such income credited or likely to be credited or paid by such person, to the payee, during the financial year, does not exceed ₹240,000.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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