INCOME TAX INDIA

 

Income Tax Return is a proof that you have paid your income tax. It contains details about your annual income and the amount of tax you have paid. Every year, Indian citizens who earn taxable income have to file Income Tax Return (ITR). Filing ITR will help you in getting a refund in case you pay more tax than what you are required to pay. If you fail to file your ITR, you might have to bear penalty etc. Income tax return form ranges from ITR 1 to ITR 7 which can be choose on the basis of Nature of Income, Nature of Person.

 

Capital Gains Income Tax

A tax that, imposed on individuals or entities which varies with respective income or profits.

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What is Long Term Capital Gains Tax (LTCG)?

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What is a Capital Gain?

Simply put, any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain. This gain or profit is considered as income and hence charged to tax in the year in which the transfer of the capital asset takes place. This is called capital gains tax, which can be short-term or long-term. Capital gains are not applicable when an asset is inherited because there is no sale, only a transfer. However, if this asset is sold by the person who inherits it, capital gains tax will be applicable. The Income Tax Act has specifically exempted assets received as gifts by way of an inheritance or will.

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What is Short Term Capital Gains Tax (STCG)?

 

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What are Perquisites in Salary Income?

Perquisites are benefits received by a person as a result of his/her official position and are over and above the salary or wages. These fringe benefits or perquisites can be taxable or non-taxable depending upon their nature.

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TDS?

Capital Gains Income Tax

To make more money out of the said investments, of course. You invest in mutual funds because you want to earn a fixed income or considerable returns after maturity. People invest in properties so that they can either occupy it themselves (thus saving on rent) or sell them later at higher prices. In this article, we will explore capital gains in detail.

What is a Capital Gain?

Simply put, any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain. This gain or profit is considered as income and hence charged to tax in the year in which the transfer of the capital asset takes place. This is called capital gains tax, which can be short-term or long-term. Capital gains are not applicable when an asset is inherited because there is no sale, only a transfer. However, if this asset is sold by the person who inherits it, capital gains tax will be applicable. The Income Tax Act has specifically exempted assets received as gifts by way of an inheritance or will.

Defining Capital Assets?
YHere are some examples of capital assets: land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewellery. This includes having rights in or in relation to an Indian company. It also includes rights of management or control or any other legal right. The following are not considered capital asset: a. Any stock, consumables or raw material, held for the purpose of business or profession b. Personal goods such as clothes and furniture held for personal use c. Agricultural land in rural India d. 6½% gold bonds (1977) or 7% gold bonds (1980) or national defence gold bonds (1980) issued by the central government e. Special bearer bonds (1991) f. Gold deposit bond issued under the gold deposit scheme (1999) Definition of rural area (from AY 2014-15) – Any area which is outside the jurisdiction of a municipality or cantonment board, having a population of 10,000 or more is considered a rural area. Also, it should not fall within a distance (to be measured aerially) given below – (population is as per the last census).

Distance Population
2 kms from local limit of municipality or cantonment board If the population of the municipality/cantonment board is more than 10,000 but not more than 1 lakh
6 kms from local limit of municipality or cantonment board If the population of the municipality/cantonment board is more than 1 lakh but not more than 10 lakh
8 kms from local limit of municipality or cantonment board If the population of the municipality/cantonment board is more than 10 lakh
Types of Capital Assets?

1. Short-term capital asset An asset which is held for not more than 36 months or less is a short-term capital asset. The criteria of 36 months have been reduced to 24 months in the case of immovable property being land, building, and house property, from FY 2017-18. For instance, if you sell house property after holding it for a period of 24 months, any income arising will be treated as long-term capital gain provided that property is sold after 31st March 2017.

2. Long-term capital asset An asset that is held for more than 36 months is a long-term capital asset. The reduced period of aforementioned 24 months is not applicable to movable property such as jewellery, debt-oriented mutual funds etc. They will be classified as a long-term capital asset if held for more than 36 months as earlier. Some assets are considered short-term capital assets when these are held for 12 months or less. This rule is applicable if the date of transfer is after 10th July 2014 (irrespective of what the date of purchase is). The assets are:

a. Equity or preference shares in a company listed on a recognized stock exchange in India

b. Securities (like debentures, bonds, govt securities etc.) listed on a recognized stock exchange in India

c. Units of UTI, whether quoted or not

d. Units of equity oriented mutual fund, whether quoted or not

e. Zero coupon bonds, whether quoted or not

When the above-listed assets are held for a period of more than 12 months, they are considered as long-term capital asset. In case an asset is acquired by gift, will, succession or inheritance, the period this asset was held by the previous owner is also included when determining whether it’s a short term or a long-term capital asset. In the case of bonus shares or rights shares, the period of holding is counted from the date of allotment of bonus shares or rights shares respectively.

Tax on Short-Term and Long-Term Capital Gains?

Tax on long-term capital gain: Long-term capital gain is taxable at 20% + surcharge and education cess. Tax on short-term capital gain when securities transaction tax is not applicable: If securities transaction tax is not applicable, the short-term capital gain is added to your income tax return and the taxpayer is taxed according to his income tax slab. Tax on short-term capital gain if securities transaction tax is applicable: If securities transaction tax is applicable, the short-term capital gain is taxable at the rate of 15% +surcharge and education cess.

Tax on Equity and Debt Mutual Funds?

Gains made on the sale of debt funds and equity funds are treated differently. Funds that invest heavily in equities, usually exceeding 65% of their total portfolio, is called an equity fund.

Funds
Effective 11 July 2014 On or before 10 July 2014
Short-Term Gains Long-Term Gains Short-Term Gains Long-Term Gains
Debt Funds At tax slab rates of the individual At 20% with indexation At tax slab rates of the individual 10% without indexation or 20% with indexation whichever is lower
Equity Funds 15% Nil 15% Nil
Calculating Capital Gains

Capital gains are calculated differently for assets held for a longer period and for those held over a shorter period.

Terms You Need to Know:

Full value consideration The consideration received or to be received by the seller in exchange for his assets, which he has transferred. Capital gains are chargeable to tax in the year of transfer, even if no consideration has been received. Cost of acquisition The value for which the capital asset was acquired by the seller. Cost of improvement Expenses incurred to make improvements to the capital asset by the seller. Note that improvements made before April 1, 1981, is never taken into consideration.

How to Calculate Short-Term Capital Gains?
  1. Start with the full value of consideration
  2. Deduct the following:
    • Expenditure incurred wholly and exclusively in connection with such transfer
    • Cost of acquisition
    • Cost of improvement
  3. This amount is a short-term capital gain

Short term capital gain = Full value consideration Less expenses incurred exclusively for such transfer Lesscost of acquisition Less cost of improvement.

How to Calculate Long-Term Capital Gains?
  1. Start with the full value of consideration
  2. Deduct the following:
    • Expenditure incurred wholly and exclusively in connection with such transfer
    • Indexed cost of acquisition
    • Indexed cost of improvement
  3. From this resulting number, deduct exemptions provided under sections 54, 54EC, 54F, and 54B
  4. This amount is a long-term capital gain

Long-term capital gain Full value consideration Less : Expenses incurred exclusively for such transfer Less:Indexed cost of acquisition Less: Indexed cost of improvement Less expenses that can be deducted from full value for consideration* (*Expenses from sale proceeds from a capital asset, that wholly and directly relate to the sale or transfer of the capital asset are allowed to be deducted. These are the expenses which are necessary for the transfer to take place.) As per Budget 2018, long term capital gains on the sale of equity shares/ units of equity oriented fund if more than Rs 1 lakh will be taxed at @ 10% without the benefit of indexation. Uptil 31st March 2018, investors had a relief to exempt amount of capital gains up to 31 Jan 2018. The amount of Gains made thereafter the cut-off date will be taxed.

Tax on Fixed Deposits
Fixed deposit interest that you receive is added along with other income that you have such as salary or professional income, and you’ll have to pay tax on that income at a tax rate that’s applicable to you. TDS is deducted on interest income when it is earned, though it may not have been paid.
Avoiding TDS on Fixed Deposits

Banks are required to deduct tax when interest income from deposits held in all the bank branches put together is more than Rs.10,000 in a year. A 10% TDS is deducted if PAN details are available. It is 20% if the bank does not have your PAN details. The details of TDS deducted on Fixed Deposit Interest is in the Form 26AS. If your total income is below the taxable limit, you can avoid tax deduction on fixed deposits by submitting Form 15G and Form 15H to the bank requesting them not to deduct any TDS. Form 15H is for senior citizens (60 years or older); Form 15G is for everybody else. These forms are for residents only and for those whose taxes add up to zero. These forms must be submitted at the start of the financial year. If you missed submitting them, then you can claim a refund by filing an income tax return.

These forms are valid for one year only. Therefore, they must be submitted each year to keep banks from deducting tax.

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