Q. I am planning to gift my wife listed equity shares worth ₹10 lakh. Assuming she sells the shares after a year, what will be the cost of acquiring the shares ?
Sampath Balaji
A. The Cost of Acquisition (COA) in the hands of your wife in case of gift received by her which are in the nature of capital assets is the cost of acquisition incurred by the donor (that is yourself) when they were acquired by him.
Q. I had incurred long-term capital loss (LTCL) of ₹1.80 lakh in FY20 and had shown the same while filing ITR. In FY21, my long-term capital gain (LTCG) is ₹75,000. As it is below ₹1 lakh, it is exempted from tax for FY21. I would like to know if I would be able to carry forward the LTCL of ₹1.80 lakh from FY20 to next year?
Srilal
A. The LTCG of FY21 will be set off against the LTCL brought forward from FY20. The taxable LTCG for FY21 will be zero and the amount carried forward with regard to the LTCL in FY20 will be ₹1.05 lakh to future years.
Q. I am a 48-year-old lady. I sold a piece of property two years ago that was gifted to me by my mother. I am a homemaker and have no other income. Am I liable to pay tax on long-term capital gains or may I claim exemption, given my age and quantum of income being less than ₹2.5 lakh p.a.?
Latha Ramanujan
A. Since the transaction is two years ago, the due date for filing the Income Tax (I-T) return is over. However, you can determine whether there was any tax involved in your transaction in the following manner.
Sale of immovable property land will be termed a “Capital Asset” and the ensuing gain/loss from the sale transaction is termed as “Long Term Capital Gain/Loss” if the period of holding is above 24 months. The holding period must be computed from the day the property was purchased by your mother to the day of sale. Capital gains is computed as follows: the first limb will consist of selling price less brokerage. Also, if the selling price is lower than the guideline value, then the guideline value will replace the selling price. Kindly check with the registrar’s office in order to ascertain the guideline value of the property for the corresponding address/survey number.
The second limb will consist of purchase cost plus registration costs which is to be adjusted with inflation (indexation). This is to be done with the aid of Cost Inflation Index (CII) released by the I-T department every assessment year. If you have incurred any cost of improvement, then the same can also be added along with the purchase cost (adjusted with CII, if applicable).
The difference between the first and second limbs is capital gains, if it is positive; if not, it is capital loss. Long Term Capital Gains attract 20% tax plus applicable surcharge and cess. In case of loss, the same can be carried forward for eight assessment years and be adjusted with any future Long Term Capital Gains.
Only on computation of the LTCG as per the aforementioned, will you be in a position to ascertain whether your total income for the LTCG is lower than the basic exemption limit or not. As you have mentioned that you are a homemaker and assuming you were a resident of India at the time of sale, if the capital gains as above is less than the basic exemption limit, there will be no tax.
Q. I am 80. I recently sold some shares and the long term capital gain is ₹45,000 as per my demat provider, through whom I purchased and sold the shares.
My total income for FY22 will be ₹4.50 lakh without the capital gains. Kindly advise whether the capital gains is to be included in the total income. In addition, I may get a total dividend of ₹6,000 from the shares I am holding as I received ₹6,000 last year.
I would also like to know whether I have to pay advance tax for the capital gains. If so, when and what will be the amount payable?
N.K. Rajagopalan
A. Long-Term Capital Gains (LTCG) from listed equity securities for which STT has been paid is exempt from tax up to the limit of₹1,00,000. In your case, the LTCG earned will not be taxable. Kindly check if the shares sold by you were held by you for more than one year in order for it to be treated as LTCG. Dividends received from companies as a result of shares held by you is taxable under “Income from Other Sources”; the same is to be included in your total income. As you are a senior citizen, advance tax is not applicable to you provided you are not having income from the head “Profits or Gains from Business and Profession”.
Q. I am a 22-year-old unemployed person. Recently, I successfully applied for share allotment in the Zomato IPO. I sold the shares and booked a profit of ₹10,000. Should I pay any tax for this profit ?
Allen Iype P. Cherian
A. Profits from sale of listed equity shares (STT paid) held for less than one year would qualify as Short-Term Capital Gain and tax on the same is payable at a special rate of 15%. However, if you do not have any other income or in other words, if your total income is less than the basic exemption limit, then there is no incidence of taxability of profit (STCG) mentioned by you.
(The adviser is partner, GSS Associates, Chartered Accountants, Chennai)