Your Taxes

I had bought 50 shares of Monsanto India on 16-11-2010 @ ₹1,878.29. I received 50 shares as bonus the following year. As of May 30, 2018, I sold this lot of 100 shares @ ₹2,825.43. The highest price on January 31, 2018, was ₹2,594.35. Please let me know my capital gains tax liability.

AK Ramdas

As per the provisions of Section 10(38) of the Income Tax Act, long-term capital gains (LTCG) arising from transfer of a long-term capital asset, being equity shares of a company or a unit of a equity-oriented fund or a unit of a business trust, was exempt from tax up to March 31, 2018, (subject to Securities Transaction Tax (STT) having been paid at specified times). However, as per newly inserted Section 112A by the Finance Act, 2018, which is effective April 1, 2018, LTCG arising from the sale of such assets computed without giving benefit for cost inflation index, exceeding ₹1 lakh, shall be taxed at 10 per cent. Bonus shares are also considered capital assets and taxed in the same manner upon sale (as applicable for original shares bought, even if the same were acquired free of cost).

The cost of acquisition for long-term capital assets acquired on or before January 31, 2018, will be higher of the actual cost of acquisition or the fair market value (FMV) as of January 31, 2018. For bonus shares acquired before January 31, 2018, FMV of the bonus shares as on January 31, 2018, will be taken as cost of acquisition, provided the bonus shares qualify to be long-term capital asset at the time of sale.

In case of a listed equity share or unit, FMV means the highest price of such share or unit quoted on a recognised stock exchange on January 31, 2018.

So, the cost of acquisition of 100 shares (including the 50 bonus shares) sold by you on May 31, (i.e. after March 31, 2018) should be taken as ₹2,594.35 and the appropriate amount of gains (without indexation) shall be considered for all 100 shares (i.e. 100 shares x ₹231.08 (profit made per share)). The tax on these gains will be 10 per cent under Section 112A.

I am a retired employee getting ₹3.75 lakh as pension. I am also an independent financial advisor distributing mutual funds. I got a commission of ₹1.2 lakh. Which ITR do I file for AY18-19. In which category should I declare the MF commission? Can I choose presumptive income scheme to file ITR.

T Balanarayan

We understand that you have retired from employment and provide independent financial advisory services on full-time basis. Accordingly, the same should be taxed under the head ‘Profits and gains from business and profession’. Also, you are receiving pension from your erstwhile employer. So, you will need to file the tax return in ITR – 3 for FY17-18.

As per sub-section 6 of Section 44AD of the I-T Act, a person earning income in the nature of commission/brokerage is not eligible for the presumptive taxation scheme.

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

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