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My wife was doing her MD in Anatomy when she received stipend in April, May and June 2016 as part of her PG course. She completed the PG course in July and then got a job in August. She has received a salary from August 2016 to March 2017. Can she avail tax exemption for the stipend received in FY2016-17.

Rajiv

According to the provisions of Income Tax Act, 1961, any scholarships granted to meet the cost of education is exempt from tax. In case your wife has received stipend which can be considered as a scholarship to meet the cost of education, then the same may be claimed as exempt from tax.

I am a 60-year old retired government employee, regularly filing IT returns for more than 20 years. I had been doing some transactions in equity shares and mutual funds for the last 10-15 years. But I haven’t included any income out of these in the IT returns filed in the respective years, as more than 90 per cent of the capital gain has been long-term, which is not taxable. But during the last financial year (2016-17), I got a short-term capital gain of around ₹50,000 in equity transactions. Now I plan to include this gain in the IT return for this year. If I do so, will there be any questioning on previous years’ transactions from the IT department? Should the details of dividend received be included in IT returns?

Ajayghosh T S

According to the provisions of Income Tax Act, 1961, with effect from October 1, 2004, any long-term capital gains on sale of equity shares (traded on a recognised stock exchange in India) is exempt from tax provided securities transactions tax has been paid on the same. However, short-term capital gains (STCG) from the sale of such shares are taxable at 15 per cent (effective rate from FY2008-09 onwards). In case the slab rate benefits are not exhausted against any other incomes, the same shall be available against the STCG.

In relation to assessment, an income tax return can be picked up for scrutiny assessment by the Assessing Officer (AO) within six months from end of the financial year in which the return is filed. Also, where any AO has reasons to believe that any income chargeable to tax has escaped assessment, the case can be picked up for reassessment up to four or six years (subject to the amount of escaped income and certain other conditions) from the end of the financial year in which the return is filed.

Accordingly, STCG must be included and taxed in the respective year’s return of income. Every year is assessed separately by the income tax department and reporting of a particular income in a particular year may not impact other years. Any assessment can be picked up based on the aforesaid timelines and circumstances.

Further, any dividend income received which is exempt from tax has to be disclosed in the return form as exempt income.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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