Tax Talk

My total income for FY18-19 will be ₹.5.25 lakh, comprising interest income from bank FDs (₹2.5 lakh), short-term capital gains (STCG) on sale of listed equity shares (₹1 lakh), long-term capital gains (LTCG) on sale of listed equity shares (₹1.25 lakh), and income from F&O trading in equity market (₹0.5 lakh). I plan to invest ₹1 lakh in tax-saving schemes to get tax benefit u/s 80C, and donate ₹10,000 to charitable institutions to get deduction u/s 80G. What is my advance tax liability?

Narayana

An individual is required to pay advance tax only if the taxes on the income exceeds ₹10,000. A resident senior citizen (age more than 60 years) not having income from business or profession is not liable to pay advance tax.

As per the provisions of the I-Tax Act, STCG arising on the sale of STT-paid equity shares would be taxable at 15 per cent, and LTCG on sale of STT-paid equity shares exceeding ₹1 lakh shall be taxed at 10 per cent.

Further, relief is available to a resident individual if the taxable income excluding capital gains is less than the basic exemption limit of ₹ 2.5 lakh. The relief shall be the excess of the basic income exemption limit over the total income excluding capital gains. LTCG on sale of STT-paid equity shares in excess of ₹1 lakh shall be taxed at 10 per cent, though the taxable income is below the threshold limit.

Your tax liability could be ₹6,240 (including cess @ 4 per cent), assuming that you are not a senior citizen. We have further assumed that the donation will qualify for 100 per cent deduction under the I-T Act.

As the tax due on your income does not exceed ₹10,000, advance tax provisions will not apply.

I have a query about setting off long-term capital loss on stocks against LTCG on stocks. For example, if I had bought 100 shares of company A at ₹150 each in Jul-17 and sold in Aug-18 at ₹200 against the ₹175 rate of share on Jan 31, ’18, the gain for LTCG is ₹25 x 100 shares, i.e., ₹2,500. If I had bought 100 shares of company B at ₹150 in Jul-17 and sold in Aug-18 at ₹175 against the Jan 31, ’18 rate of ₹200, the loss is ₹(200-175) x 100, i.e., 2,500. Can I set of this loss of ₹2,500 against the ₹2,500 gained, and consider the net LTCG as zero.

SR Subramani

As per the provisions of the I-Tax Act, LTCG on sale of STT-paid equity shares exceeding ₹1 lakh shall be taxed at the rate of 10 per cent. For computing LTCG, the cost of acquisition shall be the higher of the following: (a) actual cost of acquisition; or (b) lower of the fair market value of such share on Jan 31, ’18 (highest quoted price) or full value of consideration as a result of transfer. Considering the above, the cost of acquisition shall be ₹175 under both scenarios. Company A - gain of ₹2,500. Company B - neither gain nor loss.

The LTCG of ₹2,500 is not taxable as it is less than ₹1 lakh. For your information, any long-term capital loss can be adjusted against LTCG as per the I-T Act.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in.

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